Economics

1.The olde yogurt factory has reduced the price of its product of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firms daily sales of these sundaes have increased from 1,500/day to 1,800/day. Compute the arc price elasticty of demand over this price and consumption quantity range.

2. The subway fare in your town has just been increased from a current level of 50 cents to $1.00 per ride. As a result, the tranist authority notes a decline in ridership of 30 percent
A. Compute the price elasticty of demand for subway ride

3. General Cereals is using a regression model to estimate the demand for Tweetie Sweeties, a whistle shaped sugar coated breakfast cereal for children. The followng (multiplicative expontential) demand function is being used:

Qd=6,280P^-2.15 A^1.05 N^3.70
Where Qd=quantity demanded in 10 oz boxes
P=price per box in dollars
A=advertising expenditures on daytime TV in dollar
N=proportion of the population under 12 years old
A. Determne the point price elasticity of demand for Tweetie Sweeties
B. Determine the advertising elasticity of demand
C. What interpretation would you give to the exponent of N?
6. The demand for haddock has been estimated
log Q = a +b log P + c log I + d log P m
Where Q = quantity of haddock sold in New England
P = price per pound of haddock
I = a measure fo personal income in the New England region
Pm = an index of the price of meat and poultry
If b = -2.174, c = 0.461, and d = 1.909

A. determine the price elasticity of demand
B. determine the income elasticity of demand
C. determine the cross price elasticity of demand
D. How would you characterize the demand for haddock?
E. suppose disposable income is expected to increase by 5 percent next year. Assuming all other factors remain constant, forcast the percentage change in quantity for haddock demanded next year.

4. An estimate of the demand function for household furniture produced the following results:
F = 0.0036Y^1.08R^0.16p^-0.48
Where F = furniture expenditures per household
Y = disposable personal income per household
R = value of private residental construction per household
p= ratio of the furniture price index to the consumer price index

A. determine the point price and income elasticities for household furninture
B. What interpretation would you give the exponent for R? Why do you suppose R was included in the equation as a variable?
C. If you were a supplier to the furniture manufacturer, would you have preferred to see the analysis performed in physical sales units rather than dollars of revenue? How would this change alter the interpertation of the price coefficient, presently estimated as -0.48

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