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Consider the following specification of empirical demand and supply functions in the fresh marketsegment of the carrot industry:2sdQQ a bP ctd eP f W= + += + +a. Should the ordinary least-squares (OLS) method or the two-stage least-squares method (2SLS) method be employed to estimate market demand for carrots? Explain briefly.b. Which variables are endogenous variables in the system? Which variables are exogenous? For the model specified above, is the demand for fresh market carrots identified? Explain why or why not?
1 Since carrots are planted and harvested year-round, carrot prices are computed as average prices for each year.2 Typically farmers make production decisions for the current year using the previous year's crop prices (or a weighted-average of several previous years of crop prices). Since carrots are planted year-round, it is not unreasonable to specify current annual production as a function of current average price of carrots.
c. Using statistical software, estimate the parameters of the empirical demand function specified in part a. Write the estimated industry demand equation for carrots.d. Are the estimated slope parameters of demand statistically significant at the 15 percent level of significance? Are the algebraic signs of the parameter estimates and reasonable? Explain.e. Would you expect the demand for carrots to be elastic or inelastic when measured at the average price over the period of the sample? (Hint: Consider the discussion in Chapter 3 concerning the factors that influence demand elasticity.)f. Compute the price elasticity of demand for carrots measured at the sample mean values of price (P), quantity (Q), and time (t). Is the demand for fresh market carrots elastic, inelastic, or unitary elastic when measured at the sample mean values of P, Q, and t?g. By approximately what percentage amount would the price of carrots have to fall in order for quantity demanded to increase by 10 percent?h. Explain, in quantitative terms, the meaning of the estimate of the slope parameter on t.
a selfless person approaches Jones and Smith with a $100 bill and offers to sell it to the highest bidder, but both the winning and the losing bidders must pay her their bids. so if jones bids $2 and smith bids $1 they pay a total of $3, but jones..
Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth driver. If he hires a fourth driver, he can schedule breaks and lunch hours so all thre..
Real GDP in the U.S. increased by a% in 2008 and increased by b% in 2009, and increased by d% in 2010. In class, we learned that the average annual growth rate of real GDP for the period 2008-2010 can be (1) approximated as: (a% +b% +d%)/3
Revenue from sales of a training video for the first year are estimated to be $350,000. In addition, revenue is expected to decrease by $25,000 per year over the life of the video (which is 10 years).
What is Harry's price elasticity of demand for good x, denoted "x;px ? From Harry's perspective, is x ordinary, Gien, or neither? What is Harry's income elasticity of demand for good x, denoted "x;I? From Harry's perspective, is x normal, inferior, ..
Suppose you have been employed as an economic analyst, your job is to use the Regression Model to estimate potential sales of your employer's product.
Brainger, Inc., is purchasing new production equipment to support its facility expansion. The equipment will cost $175,000 in year zero, and it will generate $122,500 sales revenue in its first year of operation, $132,000 in its second year, and $..
Is demand elastic or inelastic in the $4-$6 price range How do you know (b.) If the table represents the demand faced by a monopoly firm, then what is that firm's marginal revenue as it increases output from 100 units to 300 units
Find and expression for capital per worker at the steady state e. Solve for the steady-state output per worker when d = 0.08 and the savings rate = 0.25 f. plot the steady state capital per worker as the savings rate goes from 0.05 to 0.50 in 0.05 in..
sales 1990 116 1991 105 1992 29 1993 59 1994 108 1995 94 1996 27 1997 119 1998 34 1999 34 2000 48 2..
ADVANCED ANALYSIS Assume the following values for Figures 5.4a and Figures 5.4b. Q1 = 20 bags. Q2 = 15 bags. Q3 = 27 bags. The market equilibrium price is $45 per bag. The price at a is $85 per bag. The price at c is $5 per bag. The price at f is ..
Demand function: qd=5,000-50p, where qd is quantity demanded and p is price per unit. A. How man units with be demanded between $10, and 20 Between $20 and 30 B. What is the arc price elasticity of demand $10, and 20? Between $20 and 30 C. What is th..
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