An economist consultant uses a field experiment to derive the following demand using regression analysis: QXd= 2,400-6 PX -0.2 PZ where PZ = $150. a. What is the own price elasticity of demand when PX = $70? Is thedemand elastic or inelastic at this price? What would happen to the firm's revenue if it decided to charge a price below $70? b. What is the cross - price elasticity of demand between good X and good Z when PX = $70? Are goods X and Zsubstitutes or complements

The objective of the question is to calculate the own price elasticity of demand and cross-price…

Answered: An economist consultant uses a field…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose demand is linear: Qd=a-bP We know that the price elasticity of demand is -0.5, quantity of demand Qd=100, price P=10, then: a=200,b=10 a=200, b=-10 a=150, b=5 a=50, b=-5
Suppose Via Rail asked government authorities for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that: both groups felt that the demand was elastic but for different reasons. both groups felt that the demand was inelastic but for different reasons. the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic.
Suppose demand is given by the equation Q = 40 - 3P. Using the point-slope formula, what is the price elasticity of demand at a price of $4? Include a negative sign if applicable, and round your answer to two decimal places.
Which of the following methods could potentially be used to estimate a price elasticity? a) aggregate responses to a survey question about willingness to pay to get the demand curve, then estimate the price elasticity b) Fit a regression model to historical data and use the coefficients to calculate the price elasticity c) Fit a logistic regression model to conjoint data and use the coefficients to calculate the price elasticity d) all of the above e) both A & C
When the price of a product increases by 20 percent, the quantity demanded decreases by 40 percent. The price-elasticity of demand coefficient for this product is:
The extended demand function of good X is: QDX = 1400 20 PX - 10 PY + 0.1 M where: QDX = quantity demanded of good X PX Price of good X PY = Price of related good Y (related in consumption to good X) M = Average consumer income. Fix the following variables: PX = 50 M = 10,000 Assume: PY changes from $50 to $80 What is the cross-price elasticity of the demand of good X with respect to PY [Use the arc elasticity formula.] a. -0.69 b. C. d. -0.87 Based on your answer to the previous question, goods X and Y are: b. 0.69 a. inelastic C. 0.87 d. complements inferior substitutes
Using regression analysis on data from a field experiment, the demand curve for a product is estimated to be QXd = 1,200 − 3PX − 0.1PZ where Pz = $300.What is the cross-price elasticity of demand between good X and good Z when Px = $140? Are goods X and Z substitutes or complements? Enter your response rounded to two decimal places. Cross-price elasticity: Goods X and Z are:
A firm is faced with the following demand function (estimated in a regression equation based onpast data).QX = 200 – 4PX , where current price (PX ) = $30The firm is thinking of reducing price to $25 because someone suggested that wouldbring in more revenue. a. What is the own-price elasticity of demand? (show absolute value)b. Is the demand function elastic, inelastic or unitary elastic at a price of $30?c. Will the price reduction bring in more revenue?

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