MyLab Economics with Pearson eText -- Access Card -- for Microeconomics
6th Edition
ISBN: 9780134125886
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 1.A, Problem 3PA
To determine
Calculation of percentage changes in sales.
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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…
Chapter 1 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Microeconomics
Ch. 1.A - Prob. 1PACh. 1.A - Prob. 2PACh. 1.A - Prob. 3PACh. 1.A - Prob. 4PACh. 1.A - Prob. 5PACh. 1.A - What is the area of the triangle shown in the...Ch. 1.A - Prob. 7PACh. 1 - Prob. 1TCCh. 1 - Prob. 2TCCh. 1 - Prob. 1.1.1RQ
Ch. 1 - Prob. 1.1.2RQCh. 1 - Prob. 1.1.3PACh. 1 - Prob. 1.1.4PACh. 1 - Prob. 1.1.5PACh. 1 - Prob. 1.1.6PACh. 1 - Prob. 1.1.7PACh. 1 - Prob. 1.1.8PACh. 1 - Prob. 1.1.9PACh. 1 - Prob. 1.1.10PACh. 1 - Prob. 1.1.11PACh. 1 - Prob. 1.2.1RQCh. 1 - Prob. 1.2.2RQCh. 1 - Prob. 1.2.3RQCh. 1 - Prob. 1.2.4RQCh. 1 - Prob. 1.2.5PACh. 1 - Prob. 1.2.6PACh. 1 - Prob. 1.2.7PACh. 1 - Prob. 1.2.8PACh. 1 - Prob. 1.2.9PACh. 1 - Prob. 1.2.10PACh. 1 - Prob. 1.2.11PACh. 1 - Prob. 1.2.12PACh. 1 - Prob. 1.2.13PACh. 1 - Prob. 1.3.1RQCh. 1 - Prob. 1.3.2RQCh. 1 - Prob. 1.3.3RQCh. 1 - Prob. 1.3.4PACh. 1 - Prob. 1.3.5PACh. 1 - Prob. 1.3.6PACh. 1 - Prob. 1.3.7PACh. 1 - Prob. 1.3.8PACh. 1 - Prob. 1.3.9PACh. 1 - Prob. 1.3.10PACh. 1 - Prob. 1.3.11PACh. 1 - Prob. 1.4.1RQCh. 1 - Prob. 1.4.2RQCh. 1 - Prob. 1.4.3PACh. 1 - Prob. 1.4.4PA
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