1. Answer the following questions about the elasticities for new domestic cars if the estimated demand function is represented by Q NA=-500PNA + 250Px + 125M -100,000,000R + 20,000 Pop + 600A, and where Q'NA is quantity demanded of new domestic cars, PNA is the average price of new domestic cars, Px is the average price of new import luxury cars, M is average annual household income, R is the average interest rate (in decimal format), Pop is the population (in millions), and A is the annual dollars spent on advertising on new cars (in millions). Recall that the new domestic cars Q NA = 5.5 million when PNA = $35,000, Px = $60,000, M = $56,000, R=8%, Pop =300 million, and A = $5,000 million. a. What is the own price elasticity of demand for new domestic cars if PNA = $35,000 Px = $60,000, M=$56,000, R = 8%, Pop =300 million, and A = $5,000 million? b. Is the demand for new domestic cars elastic, inelastic, or unit elastic at this price and values of other variables? Explain. C. Based on your answers to a and b, if the price of automobiles was increased to $36,500. would an economist expect for total revenues to increase or decrease? Explain. d. What is the cross-price elasticity of demand for new domestic cars and imported luxury cars at these values? e. Based on your answer to d, are the two vehicles substitutes or complements? Explain. Is the response elastic or inelastic? f. What is the income elasticity for new domestic cars at these values? g. Based on your answer to f, are new domestic cars inferior goods, normal goods, necessities and/or luxuries? h. What is the advertising elasticity for new domestic cars at these values? values?

Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter18: Cost-volume-profit Analysis (cvp)
Section: Chapter Questions
Problem 3R: Based on Poleskis current situation, will it earn its target net income? If not, how many units need...
icon
Related questions
Question
not use ai please
1. Answer the following questions about the elasticities for new domestic cars if the estimated
demand function is represented by
Q NA=-500PNA + 250Px + 125M -100,000,000R + 20,000 Pop + 600A, and where Q'NA is
quantity demanded of new domestic cars, PNA is the average price of new domestic cars, Px is
the average price of new import luxury cars, M is average annual household income, R is the
average interest rate (in decimal format), Pop is the population (in millions), and A is the annual
dollars spent on advertising on new cars (in millions).
Recall that the new domestic cars Q NA = 5.5 million when PNA = $35,000, Px = $60,000, M =
$56,000, R=8%, Pop =300 million, and A = $5,000 million.
a. What is the own price elasticity of demand for new domestic cars if PNA = $35,000 Px =
$60,000, M=$56,000, R = 8%, Pop =300 million, and A = $5,000 million?
b. Is the demand for new domestic cars elastic, inelastic, or unit elastic at this price and
values of other variables? Explain.
C.
Based on your answers to a and b, if the price of automobiles was increased to $36,500.
would an economist expect for total revenues to increase or decrease? Explain.
d. What is the cross-price elasticity of demand for new domestic cars and imported luxury
cars at these values?
e. Based on your answer to d, are the two vehicles substitutes or complements? Explain.
Is the response elastic or inelastic?
f. What is the income elasticity for new domestic cars at these values?
g. Based on your answer to f, are new domestic cars inferior goods, normal goods,
necessities and/or luxuries?
h. What is the advertising elasticity for new domestic cars at these values?
values?
Transcribed Image Text:1. Answer the following questions about the elasticities for new domestic cars if the estimated demand function is represented by Q NA=-500PNA + 250Px + 125M -100,000,000R + 20,000 Pop + 600A, and where Q'NA is quantity demanded of new domestic cars, PNA is the average price of new domestic cars, Px is the average price of new import luxury cars, M is average annual household income, R is the average interest rate (in decimal format), Pop is the population (in millions), and A is the annual dollars spent on advertising on new cars (in millions). Recall that the new domestic cars Q NA = 5.5 million when PNA = $35,000, Px = $60,000, M = $56,000, R=8%, Pop =300 million, and A = $5,000 million. a. What is the own price elasticity of demand for new domestic cars if PNA = $35,000 Px = $60,000, M=$56,000, R = 8%, Pop =300 million, and A = $5,000 million? b. Is the demand for new domestic cars elastic, inelastic, or unit elastic at this price and values of other variables? Explain. C. Based on your answers to a and b, if the price of automobiles was increased to $36,500. would an economist expect for total revenues to increase or decrease? Explain. d. What is the cross-price elasticity of demand for new domestic cars and imported luxury cars at these values? e. Based on your answer to d, are the two vehicles substitutes or complements? Explain. Is the response elastic or inelastic? f. What is the income elasticity for new domestic cars at these values? g. Based on your answer to f, are new domestic cars inferior goods, normal goods, necessities and/or luxuries? h. What is the advertising elasticity for new domestic cars at these values? values?
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
Entrepreneurial Finance
Entrepreneurial Finance
Finance
ISBN:
9781337635653
Author:
Leach
Publisher:
Cengage
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College