Data in 1970-1999 suggest that wine consumption per capita in the State of New York is: %∆Wine = – 0.7*(%∆Price of Wine) + 3.8*(%∆Income) + 1.0*(%∆Price of Beer) where Wine is a gallon of wine per capita, Price of Wine and Price of Beer are prices of wine and beer, respectively, and Income is the nominal income per capita. All variables are expressed as percentage changes year-over-year, which are denoted as %∆ in the above equation. Explain the demand behavior of wine drinkers in New York. Does the behavior of New York consumers follow the law of demand? Why or why not? In 2003, the New York government was considering allowing supermarkets to sell wines. Lobbyists argue that the proposed law would help the local governments to balance their budgets. The argument is that the wine prices will fall, people will buy more wines, and consequently, local governments have more tax revenues. Giving the above-estimated demand function, do you support their argument? In addition, the local governments knew that wines and beers are somewhat substituted.
Data in 1970-1999 suggest that wine consumption per capita in the State of New York is: %∆Wine = – 0.7*(%∆Price of Wine) + 3.8*(%∆Income) + 1.0*(%∆Price of Beer) where Wine is a gallon of wine per capita, Price of Wine and Price of Beer are prices of wine and beer, respectively, and Income is the nominal income per capita. All variables are expressed as percentage changes year-over-year, which are denoted as %∆ in the above equation. Explain the demand behavior of wine drinkers in New York. Does the behavior of New York consumers follow the law of demand? Why or why not? In 2003, the New York government was considering allowing supermarkets to sell wines. Lobbyists argue that the proposed law would help the local governments to balance their budgets. The argument is that the wine prices will fall, people will buy more wines, and consequently, local governments have more tax revenues. Giving the above-estimated demand function, do you support their argument? In addition, the local governments knew that wines and beers are somewhat substituted.
Chapter13: Inflation
Section: Chapter Questions
Problem 19SQ
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Data in 1970-1999 suggest that wine consumption per capita in the State of New York is:
%∆Wine = – 0.7*(%∆
where Wine is a gallon of wine per capita, Price of Wine and Price of Beer are prices of wine and beer, respectively, and Income is the nominal income per capita. All variables are expressed as percentage changes year-over-year, which are denoted as %∆ in the above equation.
- Explain the
demand behavior of wine drinkers in New York. - Does the behavior of New York consumers follow the
law of demand ? Why or why not? - In 2003, the New York government was considering allowing supermarkets to sell wines. Lobbyists argue that the proposed law would help the local governments to balance their budgets. The argument is that the wine prices will fall, people will buy more wines, and consequently, local governments have more tax revenues. Giving the above-estimated demand function, do you support their argument? In addition, the local governments knew that wines and beers are somewhat substituted.
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