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.

Given equation - %∆Wine = – 0.7*(%∆Price of Wine) + 3.8*(%∆Income) + 1.0*(%∆Price of Beer) Part A –…

Answered: Data in 1970-1999 suggest that wine…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.

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