where income is measured in thousands of dollars. If p = 5, and Y = %3D a. What is the income elasticity? Interpret and explain your result. What type of good is this? b. If the equation is then re-estimated using just dollars instead of thousands of dollars, what will be the effect on the coefficient for Y and the income elasticity? Explain your result. c. How would the income elasticity change if the price were increased to $9.30? Interpret

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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The demand for boxes of nails is estimated to be Q 185-10 p + 3 Y,
Q2
where income is measured in thousands of dollars. If p
= 5, and Y = 30,
a. What is the income elasticity? Interpret and explain your result. What type of good is
this?
b. If the equation is then re-estimated using just dollars instead of thousands of dollars,
what will be the effect on the coefficient for Y and the income elasticity? Explain your
result.
c. How would the income elasticity change if the price were increased to $9.50? Interpret
and explain your result.
Transcribed Image Text:The demand for boxes of nails is estimated to be Q 185-10 p + 3 Y, Q2 where income is measured in thousands of dollars. If p = 5, and Y = 30, a. What is the income elasticity? Interpret and explain your result. What type of good is this? b. If the equation is then re-estimated using just dollars instead of thousands of dollars, what will be the effect on the coefficient for Y and the income elasticity? Explain your result. c. How would the income elasticity change if the price were increased to $9.50? Interpret and explain your result.
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