An analyst for a major apparel company estimates that the demand for its raincoats is given by ln Qdx = 10 − 1.2 ln Px + 3 ln R − 2 ln Ay where R denotes the daily amount of rainfall and Ay represents the level of advertising on good Y. What would be the impact on demand of a 10 percent increase in the daily amount of rainfall? What would be the impact of a 10 percent reduction in the amount of advertising directed toward good Y? Can you think of a good that might be good Y in this example?

An analyst for a major apparel company estimates that the demand for its raincoats is given by ln Qdx = 10 − 1.2 ln Px + 3 ln R − 2 ln Ay where R denotes the daily amount of rainfall and Ay represents the level of advertising on good Y. What would be the impact on demand of a 10 percent increase in the daily amount of rainfall? What would be the impact of a 10 percent reduction in the amount of advertising directed toward good Y? Can you think of a good that might be good Y in this example?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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IS THIS ANSWER CORRECT The price elasticity of demand for bread is computed as the percentage change in quantity being demanded with respect to the percentage change in price. Hence, option A is correct. When there is a new product that is a close substitute for bread, the price elasticity of demand for bread would be higher. Hence, option B is correct. When the bread is considered to be a necessity good, the price elasticity of demand for bread would be higher. Hence, option C is correct. Hence, the correct option is D.
One practical reason that economists use percentages to measure elasticity is: Group of answer choices: that more complicated calculations tend to be more accurate. to be able to compare characteristics of unrelated products. to convert elasticities to dollar units. to convert units to the metric system.
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