What does the sign of the coefficient suggest

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Reference no: EM133596674

Problem

Economists at Econ Ball Company analyze the relationship between consumer income and product demand. Historical data found when an 800-dollar fiscal stimulus was sent to consumers; consumer income increased by 1.4 percent. Historical data also shows sales decreased from 900,00 balls to 825,000 balls after controlling for all other confounding variables. Show all work and calculations. (20-point total).

Question 1. What is the income elasticity of demand based on the data given (use the midpoint formula)?

Question 2. What does the sign of the coefficient (positive or negative) suggest (type of product relevant to income elasticity)?

Question 3. Based on the findings, if there is a report that a second fiscal stimulus is being sent to customers, how should Econ Ball Company prepare (should it make more for fewer balls)?

Question 4. What if historical data show sales increased from 900,000 balls to 1.1 million balls after controlling for all other confounding variables? What is the income elasticity of demand in this case? The type of product in this case (type of product relevant to income elasticity)?

Reference no: EM133596674

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