Aggregate Demand Curve ( AD ): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise, the quantity demanded falls. Aggregate Supply Curve ( AS ): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rises, the quantity supplied also rises. The curve depends on the duration of time. Short Run Aggregate Supply ( SRAS ): It is a positively slopped curve in which supply increases when price rises. The reason for upward slopping is that the wages are sticky in the short run due to formal or informal contracts. At higher aggregate prices there is a higher profit leading to a high level of output. Long Run Aggregate Supply ( LRAS ): It is a vertical curve which means it is an independent of price. When price increases, there is no change in the quantity supplied. In the long run, nominal wages are not fixed rather it can be negotiated. Gross Domestic Product (GDP): It is defined as the value of output which is produced inside the border of the country in the given interval of time.

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profit maximizing and loss minamization fire dragon co mindtap

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Chapter 16, Problem 1P

To determine

Concept Introduction:

Aggregate Demand Curve ( AD ): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise, the quantity demanded falls.

Aggregate Supply Curve ( AS ): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rises, the quantity supplied also rises. The curve depends on the duration of time.

Short Run Aggregate Supply ( SRAS ): It is a positively slopped curve in which supply increases when price rises. The reason for upward slopping is that the wages are sticky in the short run due to formal or informal contracts. At higher aggregate prices there is a higher profit leading to a high level of output.

Long Run Aggregate Supply ( LRAS ): It is a vertical curve which means it is an independent of price. When price increases, there is no change in the quantity supplied. In the long run, nominal wages are not fixed rather it can be negotiated.

Gross Domestic Product (GDP): It is defined as the value of output which is produced inside the border of the country in the given interval of time.

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profit maximizing and loss minamization fire dragon co mindtap

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…