Econ 5315 Unit 3

#1 q = 3600 - 12p+0.6m - 2.5Pr

Q is quantity demanded of the goods 

P is price 

M income 

Pr is the price of related good R 

The coefficient on P 

• Is negative as dictated by the law of demand

• Should not have the same sign as the coefficient on Pr

• Should not be greater than on in absolute value

q = 3600 - 12p+0.6m - 2.5Pr

Q is quantity demanded of the goods 

P is price 

M income 

Pr is the price of related good R 

The coefficient on P 

The good is ...

• A normal good because the coefficient on P is negative

• A normal good because the coefficient on M is Positibve

• An inferior good because the coefficient on M is less than one

#3 q = 3600 - 12p+0.6m - 2.5Pr

Q is quantity demanded of the goods 

P is price 

M income 

Pr is the price of related good R 

The coefficient on P

• Are complements because the coefficient on Pr is negative

• Are substitutes because the coefficient on Pr is negative

#4 q = 3600 - 12p+0.6m - 2.5Pr

 If the price of the good decreases by $10 all else constant the quantity demanded will _____ by ______units 

• Increase by 12

• Increase by 120

• Increase by 250

#5 For a linear demand function q=a + bp+ cm + dpr, The cross price elasticity is

• d

• d(q/pr)

• d(pr/q)

• -d

The estimated demand for cement is

• Elastic because E = 8.2

• Elastic because e=-3.54

• Ineaslstic because = -0.357

P values 0.0461 , 0.0357, 0.0014 0.0439

At the 5% level of significance which parameter estimates are statistically significant

• Only the estimate for c

• None

• All are statistically significant

 If tax revenue per capita increases by 10% the estimated quantity of cement demand will 

• Increase by less than 1%

• Increase more than 5% but less than 10%

• 1. Increase more than 10% 

If the price of asphalt Pr decreases 15% the estimated  quantity of cement demanded will

• Decrease by 11.8%

• Increase by 5.2%

• 2. Decrease by 5.2%

10 Seasonal or cyclical variation in a time series model is regular in nature by can be accounted for by dummy variables true or false

• true

• false