Comparative StaticCOMPUTATIONAL QUESTIONS5. The demand function for good X is In Q -a+bln P,+cln M+e, where Px is the price of good X and M is income. Least squaresregression reveals thatâ = 7.42, i --2.18, and = 0.34.a. If M-55,000 and Px =4.39, compute the own price elasticity ofdemand based on these estimates. Determine whether demand isclastic or inclastic.b. If M-55,000 and Px= 4.39, compute the income elasticity ofdemand based on these estimates. Determine whether X is anormal or inferior good.Obtaining Elisticities From DemancFunctionAnswera. The own-price elasticity of demand is -2.18, so demand is elastic.b. The income elasticity of demand is 0.34, so X is a nomal good.

The own price elasticity of demand is the percentage change in the quantity demanded of a good or…

5. The demand function for good X is InQ-a+bin P, +cln M +e where Px is the price of good X and M is income. Least squares regression reveals that â = 7.42, 5 = -2.18, and = 0.34. a. If M-55,000 and Px -4.39, compute the own price elasticity of demand based on these estimates. Determine whether demand is elastic or inelastic. b If M 55 000 and Px 4 39 compute the income elasticity of

5. The demand function for good X is InQ-a+bin P, +cln M +e where Px is the price of good X and M is income. Least squares regression reveals that â = 7.42, 5 = -2.18, and = 0.34. a. If M-55,000 and Px -4.39, compute the own price elasticity of demand based on these estimates. Determine whether demand is elastic or inelastic. b If M 55 000 and Px 4 39 compute the income elasticity of

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

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 6E

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