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- Essay 3 - 20 points As the manager of a local hotel chain, you have hired an econometrician to estimate the demand for one of your hotels (H). The estimation has resulted in the following demand function: QH - 2.25PSE + 0.8POH + 0.01M, where PH is the price of a room at your hotel, Pc is the price of concerts in your area, Pse is the price of sporting events in your area, PoH is the average room price at other hotels in your area, and M is the average income in the United States. What would be the impact on your firm of: a. A $500 increase in income? b. A $10 reduction in the price charged by other hotels? c. A $7 increase in the price of tickets to local sporting events? d. A $5 increase in the price of concert tickets, accompanied by an $8 increase in income? 2,000 – PH- 1.5Pc %3D -The demand equation for a certain brand of pencil is 100y? + 9t2 = 3600 where (y) represents the number (in thousands) of ten-packs demanded each week when the unit price is $(t). How fast is the quantity demanded increasing when the unit price per ten-pack is $14 and the selling price is dropping at the rate of $0.15 per ten-pack per week?Transport economists Lasse Fridstrøm and Vegard Østli studied the demand for cars in Norway between 2002 and 2016. Regarding gasoline-powered cars, the own-price elasticity was −1.094, and the cross-price elasticities with respect to the prices of gasoline, electricity, and electric cars were −0.71, 0.06, and 0.19 respectively. As for electric cars, the own-price elasticity was −0.99, and the cross-price elasticities with respect to the prices of electricity, gasoline, and gasoline-powered cars were −0.18, 0.38, and 0.35 respectively.a. Referring to the above data, discuss whether gasoline cars and electricity are substitutes or complements.b. Electric cars are more expensive than gasoline cars. Compare the incomes of people who buy electric cars vis-à-vis those who buy gasoline cars.c. Considering the buyers’ incomes, explain why the demand for electric cars is less price elastic than the demand for gasoline cars.d. Why would the short-run demand for gasoline cars be less elastic with…
- The per capita annual income of the residents of Hyderabad was Rs. 14,000 a year ago and presently it is Rs. 16,000. The income elasticity of demand for cereals is 1.15. If the consumption of cereals was 300 gm a year ago then compute the present consumption of the cereals.The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:If the cross elasticity of demand between bread rolls and cheese is –3,0, this implies that thesegoods are
- The demand for a good is QD = 19 – 2P + 4l where P and I represent price and income respectively. At price of P=1 and income l=32, determine what type of good this is (inferior, necessity, or luxury) by calculating the income elasticity of demand.The demand for Widgets (QX) is a function of the price of widgets (PX), the price of woozles (PY), and per capita income (I): QX = 1950 - 10 PX + 5 PY - 0.1I Currently, PX = 25, PY = 10, and I = 15,000. (a) Calculate the elasticity of demand for widgets with respect to its own price, the price of woozles, and income. (b) Over what range of prices is the demand for widgets elastic? (c) If the cost per widget is 10 and the manufacturer behaves as a monopolist, how many widgets will be sold and at what price. (d) By how much must the price of widgets change if there is a 1% decrease in per capita income and the goal is to keep QX constant.For each of the following price elasticity of demand coefficients, calculate the percentage change in the quantity demanded if the associated price increase is 10%. (a) Ed=0.2 Ed=1.6
- The demand for Widgets (QX) is a function of the price of widgets (PX), the price of woozles (PY), and per capita income (1): QX = 1950 - 10 PX + 5 PY-0.11 Currently, PX = 25, PY = 10, and 1 = 15,000. (a) Calculate the elasticity of demand for widgets with respect to its own I price, the price of woozles, and income. (b) Over what range of prices is the demand for widgets elastic? (c) If the cost per widget is 10 and the manufacturer behaves as a monopolist, how many widgets will be sold and at what price: (d) By how much must the price of widgets change if there is a 1% decrease in per capita income and the goal is to keep QX constant.Exercise : Following an increase in it's price, from 10$ to 12$, the demand for a good falls from 10500 to8100 units.What elasticity of demand would you estimate from these data? Calculate its value, first by using the general formula (for discrete changes), then by assuming a constantconstant elasticity of demand (log formula).Calculate the demand for p=9 (note q9 the quantity for p=9), using the general formula then in log of the elasticity calculated in Now, Knowing the value of the direct price elasticity of demand calculated previously, assuming constant costs andcosts and rivals not responding to your price cut, would you have recommended the price cut from 10 to 9?price cut from 10 to 9 ?For the demand function = 200 − 3? , calculate the arc price elasticity for a change in price from ? = 50 to ? = 45.