Find the quantity demanded if price is 10 income is 9000

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Reference no: EM13389793

A multiplicative demand function of the form: Qd = aPb1Yb2Pob3 is estimated using cross-sectional data and 224 observations. The regression results were as follows:

Constant (a) Price

(P) Income

(Y) Price of other good (Po)

Coefficient 0.02248 -0.2243 1.3458 0.1034

Standard Error 0.01885 0.0563 0.5012 0.8145

a. How should the coefficients be interpreted in this equation? Explain.

b. What is the quantity demanded if price is $10, income is $9000, and price of the other good is $15? Show your calculations.

c Is demand elastic or inelastic? How can you tell? What impact would a price increase have on total revenue? on total profit? Explain.

d How are these two goods related? Should the firm be concerned about a change in the price of the other good? Explain.

e. Is this product a luxury, necessity, or inferior good? Explain.

Reference no: EM13389793

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