If P is 50 pence, Y is £20 000 and Pm is 40 pence, what is the estimated value of Qd? ..................................................................................................................................................If the price of butter went up by 6 pence per kilo, all other things equal, what would happen to the estimated demand for butter?................................................................................... ................................................................................................................................................. Going back to the original price of 50 pence, if the value of Y now rose to £22,000 what would happen to the estimated demand for butter? ..................................................................................................................................................What is the income elasticity of demand for butter according to your calculations in (c)? What sort of good is butter according to this result? .................................................................................................................................................. .................................................................................................................................................. Again, going back to the original demand, if the price of margarine now rose by 10 pence what would happen to the demand for butter? .................................................................................................................................................. .................................................................................................................................................. If we introduced another variable, TIME, into the demand for butter equation so that the original equation becomes:Qd = 145 – 1.25P – 0.001Y + 2Pm – 4.5TIMEWhere the TIME term takes a value of 1 for 2001, 2 for 2002 and so on, until it has a value of 10 for 2010.What would happen to the estimated demand for butter? And why might this happen? .................................................................................................................................................. 3. The following is a hypothetical estimate of a demand curve for butter over the period 2001–10.Qa = 145 – 1.5P – 0.0017+ 2PmWhere Qa is the quantity of butter sold in grams per person per week;Pis the price of butter (in pence per kg, at 2000 prices);Y is the annual disposable income per head (in £s at 2000 prices);Pm is the price of margarine (in pence per kg, at 2000 prices).

Given estimated demand equation for butter over the period 2001-10: Qd=145-1.5P-0.001Y+2Pm…

Answered: If P is 50 pence, Y is £20 000 and Pm…

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter3: Supply And Demand: Theory

Section: Chapter Questions

Problem 19QP

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Question

If P is 50 pence, Y is £20 000 and P_m is 40 pence, what is the estimated value of Q_d?

..................................................................................................................................................

If the price of butter went up by 6 pence per kilo, all other things equal, what would happen to the estimated demand for butter?

...................................................................................

.................................................................................................................................................

Going back to the original price of 50 pence, if the value of Y now rose to £22,000 what would happen to the estimated demand for butter?

..................................................................................................................................................

What is the income elasticity of demand for butter according to your calculations in (c)? What sort of good is butter according to this result?

..................................................................................................................................................

Again, going back to the original demand, if the price of margarine now rose by 10 pence what would happen to the demand for butter?

..................................................................................................................................................

If we introduced another variable, TIME, into the demand for butter equation so that the original equation becomes:

Q_d = 145 – 1.25P – 0.001Y + 2P_m – 4.5TIME

Where the TIME term takes a value of 1 for 2001, 2 for 2002 and so on, until it has a value of 10 for 2010.

What would happen to the estimated demand for butter? And why might this happen?

..................................................................................................................................................

3. The following is a hypothetical estimate of a demand curve for butter over the period 2001–10.
Qa = 145 – 1.5P – 0.0017+ 2Pm
Where Qa is the quantity of butter sold in grams per person per week;
Pis the price of butter (in pence per kg, at 2000 prices);
Y is the annual disposable income per head (in £s at 2000 prices);
Pm is the price of margarine (in pence per kg, at 2000 prices).

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