The demand function for good X is ln QXd = a + b ln PX + c ln M + e, where Px is

Question

The demand function for good X is ln QXd = a + b ln PX + c ln M + e, where Px is the price of good X and M is income. Least squares regression reveals that: =7.42 =-2.18 =0.34 If M = 55,000 and Px = 4.39, compute the own price elasticity of demand based on these estimates. Determine whether demand is elastic or inelastic. Own price elasticity of demand: Demand is . If M = 55,000 and Px = 4.39, compute the income elasticity of demand based on these estimates. Determine whether X is a normal or inferior good. Income elasticity of demand: X is .

Explanation / Answer

A. Own price elasticity of demand: -2.18

Demand is elastic

B.Income elasticity of demand: 0.34

X is a normal good

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.