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The solution to Elasticity of demand
A client has provided you with data on the price of cars, the price of gasoline, the quantity of new cars sold in Country X. In addition you observe Gross Domestic Product per capita (GDP is a measure of national income and 'per capita' means per person.) Using the regression techniques that you learn in Ch 3, you use the data to estimate the following log-linear market demand equation for new cars:ln Qcars = 5 - 2.4 ln Pcars - 1.2 ln Pgasoline + 0.5 ln (GDP per capita)
a. What is the estimated elasticity of demand for new cars with respect to the price of cars? What would happen to quantity of new cars sold if price of cars increases by 5%?
b. What is the estimated elasticity of demand for new cars with respect to the price of gasoline? What would happen to quantity of new cars sold if price of gas increases by 5%?
c. What is the estimated elasticity of demand for new cars with respect to GDP per capita?
The raise of Hispanics in the labor force but required data showing what it means. Explain how much of and increase in the labor force.
Which country is capital abundant according to the Heckscher-Ohlin theorem? Given your answer to (a), draw the PPF for Canada. Also draw the indifference curve and the relative price line for the no-trade equilibrium.
The similar same set of price quantity combinations are utilized to compute the price elasticity of demand
Derive the book supply curve where price is expressed as a function of output. Calculate the equilibrium level of output and local bookstore sales revenue.
Assume that a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed following levels of production corresponding to different numbers of workers:
This problem uses Okun's law to study how the unemployment and inflation rates change when there are demand shocks. Assume that the relationship between the output ratio and the unemployment rate, U is given by the equation U = 6.0 - 0.5 (output ..
Illustrate the quantity of laptops demanded, the level of imports of laptops, the price paid for laptops and the consumer surplus
When McDonald's Corp. reduced the price of its Big Mac by 75 percent if customers also purchased-Using your knowledge of game theory, what do you thank disrupted McDonald's plans?
An open economy has the following pattern of income and domestic expenditure: For each of the three years, evaluate the balance of trade facing the economy.
What money supply must the Bank of Canada set next year if it wants to keep the price level stable? What money supply must the Bank of Canada set next year if it wants inflation of the ten percent?
Given the data of real disposable income and real consumption, draw consumption function, determine the slope-What is the marginal propensity to consume?
If I told you that GDP was forecast to rise by a bit more than 3% over the next year, what would that mean to you? What should you be asking about the forecast?
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