Answered: The following regression is the demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following regression is the demand for free-range chicken, which was estimated from (actual) nationwide data provided by a large UK retailer over a two-year period Qx= 229,821 - 38,121 Px + 28,826 Py,

where: Qx = quantity of free-range chicken sold (number of units), Px = average price of free-range chicken ; and Py = average price of standard non-free-range chicken(f). The average for these variables in these two years are: Qx= 117,735, Px= f 5.56 and Py = 3.46.

Question: Calculate the values of the two price elasticities (own-price elasticity, and cross-price elasticity) and interpret them, also critically justifying whether they make intuitive sense.

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What is the functional form of this equation? What are the advantages and limitations of this functional form?
Interpret precisely the coefficients of Px and Py in the regression.

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If marginal cost MC = 2.5 (assume this is constant), calculate the profit-maximising price and the revenue maximising price. In doing so, remember that

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