The reasons for learning consumption and saving functions together.

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Answer 1

Question

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

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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 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

Answer 6

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.

Economics Concept Introduction

Consumption function − It is relationship between consumption and disposable income.

Saving function − It is relationship between saving and disposable income.

Answer 7

Chapter 9, Problem 1E

To determine

The reasons for learning consumption and saving functions together.

Answer 8

Expert Solution & Answer

Answer to Problem 1E

The reason for studying consumption and saving function together is that consumers have only two options either they can spend their income on present consumption or save it for future consumption.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The income that the household sector of the economy earns can be used in two ways.

First, by purchasing goods and services for present consumption.
Second, by saving the income for future consumption.

Consumers don't spend all their income on present consumption, they retain something for future as well. Thus, consumption and saving always go together. Any change in one impacts the other and therefore are studied together.