Chapter 4
5.General cereals are using a regression model to estimate the demand for tweetie sweeties, a whistle shaped sugar coated breakfast cereal for children. the following(multiplicative exponential) demand function is being used: QD=6,282P-2.15A1.05N3.70 where QD = quantity demanded, in 10ox boxes
P= price per box, in dollars
A= advertising expenditures on daytime television, in dollars
N = proportion of the population under 12 years old
a. Determine the point price elasticity of demand for tweetie sweeties.
-2.15
b. Determine the advertising elasticity of demand
1.05
c. What interpretation would you give to the exponent of N?
Increase in 1% in population of 12 year old will increase the demand of the general cereal’s product by 3.70%.
6. The demand for haddock has been estimated as log Q = a + b log P + c log I = d log Pm
Where Q = quantity of haddock sold in New England
P = price per pound of haddock
I = a measure of personal income in the New England region
Pm = an index of the price of meat and poultry
If b = -2.174, c = .461, and d = 1.909,
1. Determine the price elasticity of demand. =-2.174
2. Determine the income elasticity of demand. = 0.461
3. Determine the cross price elasticity of demand =1.909
4. How would you characterize the demand for haddock?
-2.175 = demand is elasticity as it is more than 1 0.461=if income went up 1% its effect is minimum. 1.909=if price elasticity is 1.909 it will effect haddock.
5. Suppose disposable income is expected to increase by 5 percent next year. Assuming all other factors remain constant, forecast the percentage change in the quantity of haddock demanded next year.
Increase in income=5% =5x0.461 =2.305% that is change in quantity demand of haddock.
7. An estimate of the demand function for household
P= price per box, in dollars
A= advertising expenditures on daytime television, in dollars
N = proportion of the population under 12 years old
a. Determine the point price elasticity of demand for tweetie sweeties.
-2.15
b. Determine the advertising elasticity of demand
1.05
c. What interpretation would you give to the exponent of N?
Increase in 1% in population of 12 year old will increase the demand of the general cereal’s product by 3.70%.
6. The demand for haddock has been estimated as log Q = a + b log P + c log I = d log Pm
Where Q = quantity of haddock sold in New England
P = price per pound of haddock
I = a measure of personal income in the New England region
Pm = an index of the price of meat and poultry
If b = -2.174, c = .461, and d = 1.909,
1. Determine the price elasticity of demand. =-2.174
2. Determine the income elasticity of demand. = 0.461
3. Determine the cross price elasticity of demand =1.909
4. How would you characterize the demand for haddock?
-2.175 = demand is elasticity as it is more than 1 0.461=if income went up 1% its effect is minimum. 1.909=if price elasticity is 1.909 it will effect haddock.
5. Suppose disposable income is expected to increase by 5 percent next year. Assuming all other factors remain constant, forecast the percentage change in the quantity of haddock demanded next year.
Increase in income=5% =5x0.461 =2.305% that is change in quantity demand of haddock.
7. An estimate of the demand function for household