Researchers estimated the demand function for beer. The estimated equation is: In Beer = 7.28-0.980ln Pr +0.065ln PrCider - 0.040ln PrWine +0.074Income + e where In Beer is the natural log of beer consumed (in millilitres), In Pr denotes the natural log of the price of beer, In PrCider is the natural log of cider price, InPrWine is the natural log of wine price, and Income denotes income in thousands £s. (a) What is the change in beer demand when the price of beer increases by 1 percent? (b) What is the change in beer demand when the price of cider falls by 20 percent? (c) What is the change in beer demand when the income increases by 2.5 percent, when the income equals £40,000?

ENGR.ECONOMIC ANALYSIS
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1. Researchers estimated the demand function for beer. The estimated equation is:
In Beer = 7.28-0.980ln Pr +0.065ln PrCider - 0.040ln PrWine +0.074Income + e
where In Beer is the natural log of beer consumed (in millilitres), InPr denotes the natural
log of the price of beer, In PrCider is the natural log of cider price, In PrWine is the natural
log of wine price, and Income denotes income in thousands £s.
(a) What is the change in beer demand when the price of beer increases by 1 percent?
I
W
(b) What is the change in beer demand when the price of cider falls by 20 percent?
(c) What is the change in beer demand when the income increases by 2.5 percent, when the
income equals £40,000?
Transcribed Image Text:1. Researchers estimated the demand function for beer. The estimated equation is: In Beer = 7.28-0.980ln Pr +0.065ln PrCider - 0.040ln PrWine +0.074Income + e where In Beer is the natural log of beer consumed (in millilitres), InPr denotes the natural log of the price of beer, In PrCider is the natural log of cider price, In PrWine is the natural log of wine price, and Income denotes income in thousands £s. (a) What is the change in beer demand when the price of beer increases by 1 percent? I W (b) What is the change in beer demand when the price of cider falls by 20 percent? (c) What is the change in beer demand when the income increases by 2.5 percent, when the income equals £40,000?
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