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?

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

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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