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Chapter 3

Chapter 3 answers

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Department
Economics
Course Code
Economics 2163A/B
Professor
Prof

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Chapter 3 Answers to Questions and Problems 11The result is not surprising Given the available information the own price elasticity 137of demand for major cellular telephone manufacturer is 06 8E Since P Q17this number is greater than one in absolute value demand is elastic By the total revenue test this means that a reduction in price will increase revenues 16Using the change in revenue formula for two productsso revenues will increase million890120 40052 1 600 Rby 98 million19The regression output and corresponding demand equations for each state are presented belowILLINOISSUMMARY OUTPUTRegression StatisticsMultiple R029R Square009Adjusted R Square005Standard Error15115Observations50ANOVAdegrees of freedomSSMSFSignificance FRegression2100540935027047220012Residual471073835152284756Total49117437608CoefficientsStandard Errort StatPvalueLower 95Upper 95Intercept42654965600909310416095629Price262139901908525533076Income14326832100040582805Table 34The estimated demand equation isWhile it appears 42652621432QPMthat demand slopes upward note that coefficient on price is not statistically different income by 1000 increases demand by 1432 units Since from zero An increase in tstatistic associated with income is greater than 2 in absolute value income is a the Rsquare is extremely low significant factor in determining quantity demanded The suggesting that the model explains only 9 percent of the total variation in the demand price and income play an important role in for KBC microbrews Factors other than determining quantity demandedManagerial Economics and Business Strategy 7e Page 1
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