The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant. Concept Introduction : Search refers to the process of surveying a number of sellers or buyers to determine the lowest price . In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

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Answer 1

Question

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Expert Solution & Answer

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Answer 3

Question

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 5

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Answer 6

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

Answer 7

Chapter 14, Problem 2.5P

a)

To determine

The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

Answer 8

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

Answer 9

b)

To determine

The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.

Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.

Answer 10

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Answer 11

c)

To determine

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 14 - Prob. 1.1P Ch. 14 - Prob. 1.2P Ch. 14 - Prob. 1.3P Ch. 14 - (Search with imperfect Information) The following...Ch. 14 - Prob. 2.5P Ch. 14 - Prob. 3.6P Ch. 14 - Prob. 3.7P Ch. 14 - Prob. 3.8P Ch. 14 - Prob. 4.9P Ch. 14 - Prob. 4.10P

Solution Summary: The author explains the effect of search on an increase in the consumer's wage, keeping other things as constant.

The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.

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Chapter 14 Solutions