###PLEASE CHECK IMAGE FOR CORRECT EQUATIONIn class, we estimated the per-capita demand function for watermelons (in natural logs) to be????? = ―3.7 ― 1.02???? + 1.6????? ― 0.75?????where P is the price of watermelon ?? is per capita income, and ?? is the freight price. Suppose the natural log of the supply curve is given by ????? = 1.2 + 0.6????.Please answer both of these: 1) What is the cross-price elasticity of freight and what does it say about whether freight is a complement or substitute? What is the income elasticity of watermelon demand and what does it say about whether watermelon is an inferior versus normal or luxury good? 2) Hold the per capita income and freight prices equal to their sample means: 800 and 16, respectively. What is the equilibrium price and quantity? Please keep your answers to between one and three sentences.In class, we estimated the per-capita demand function for watermelons (in natural logs) to belogQp = -3.7 – 1.02logP + 1.6logYN - 0.75logPFDwhere P is the price of watermelon YN is per capita income, and PF is the freight price. Suppose thenatural log of the supply curve is given by logQs=1.2 + 0.6logP.Please answer both of these:1) What is the cross-price elasticity of freight and what does it say about whether freight is acomplement or substitute? What is the income elasticity of watermelon demand and whatdoes it say about whether watermelon is an inferior versus normal or luxury good?2) Hold the per capita income and freight prices equal to their sample means: 800 and 16,respectively. What is the equilibrium price and quantity?

Answered: Image /qna-images/answer/96fbcfbc-bd78-4b6f-8910-3e29d8f6c170.jpg

Answered: In class, we estimated the per-capita…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 1SQP

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###PLEASE CHECK IMAGE FOR CORRECT EQUATION

In class, we estimated the per-capita demand function for watermelons (in natural logs) to be
????? = ―3.7 ― 1.02???? + 1.6????? ― 0.75?????
where P is the price of watermelon ?? is per capita income, and ?? is the freight price. Suppose the
natural log of the supply curve is given by ????? = 1.2 + 0.6????.
Please answer both of these:
1) What is the cross-price elasticity of freight and what does it say about whether freight is a
complement or substitute? What is the income elasticity of watermelon demand and what
does it say about whether watermelon is an inferior versus normal or luxury good?
2) Hold the per capita income and freight prices equal to their sample means: 800 and 16,
respectively. What is the equilibrium price and quantity?

Please keep your answers to between one and three sentences.
In class, we estimated the per-capita demand function for watermelons (in natural logs) to be
logQp = -3.7 – 1.02logP + 1.6logYN - 0.75logPF
D
where P is the price of watermelon YN is per capita income, and PF is the freight price. Suppose the
natural log of the supply curve is given by logQs=1.2 + 0.6logP.
Please answer both of these:
1) What is the cross-price elasticity of freight and what does it say about whether freight is a
complement or substitute? What is the income elasticity of watermelon demand and what
does it say about whether watermelon is an inferior versus normal or luxury good?
2) Hold the per capita income and freight prices equal to their sample means: 800 and 16,
respectively. What is the equilibrium price and quantity?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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