Question 1

Limitations of using experimentation to estimate demand elasticities include:

Accepted Answer

Experiments can be difficult in isolating the impact of price from other factors affecting demand, such as changes in the economy, consumer preferences, or competitor actions. This can lead to inaccurate estimates of demand elasticities. While determining which product's elasticity to estimate and getting customers to buy the product can also be challenges, they are not inherent limitations of using experimentation as a method for estimating demand elasticities. Difficulty in being able to filter out valid facts from the information set is also not a specific limitation of using experimentation in estimating demand elasticities.

Question 2

The demand function for good C is derived from the utility function,U = C^$\alpha$M^$\alpha$-1 depends upon:

Accepted Answer

The demand function for good C depends only on the consumer's income and the price of C, as given by the term U1P1 in the utility function. The other terms in the utility function involve other goods (F1, S1, M) and their respective prices, but they do not determine the demand for good C.

Question 3

To economists,survey data is not always reliable because:

Accepted Answer

Survey data is not always reliable because there is no cost involved in providing incorrect or poorly thought out responses to survey questions. This is known as response bias and it can have a significant impact on the accuracy of the data collected. People may also be hesitant to be completely honest in their responses or may not fully understand the questions being asked, leading to further inaccuracies. However, this does not mean that all survey data is unreliable as proper sampling techniques and well-designed surveys can still provide valuable insights.

Question 4

A consumer's demand function for a good Q is of the form P = 20 - 2Q.Derive the consumer's price elasticity of demand for this good when price decreases to $6 from $8.What can be inferred about the shape of the consumer's price consumption curve?

Accepted Answer

The answer of A consumer's demand function for a good...

Question 5

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Q_i,where P is price per unit and Q_i is the number of units demanded by the i^th consumer.What is the equation for the market demand curve?

Accepted Answer

The answer of Suppose there are 20 identical consumers in...

Question 6

The exponents of a Cobb-Douglas utility function,U = C^$\alpha$M^$\alpha$-1,represent:

Accepted Answer

The exponents in a Cobb-Douglas utility function represent the share of income devoted to each good. This is because the exponents indicate the proportion of total spending allocated to each good, reflecting consumer preferences for the distribution of their income across different goods.

Question 7

Which of the following methods is not generally relied upon to estimate demand?

Accepted Answer

Comparison with competitors' sales may not always accurately reflect the demand for a product, as factors such as marketing strategies and products offered may also impact sales. Therefore, it is not generally relied upon as a sole method for estimating demand.

Question 8

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

Accepted Answer

The answer of In the country of Aldeine,the market demand...

Question 9

U = C^$\alpha$M^$\alpha$-1 is an example of a:

Accepted Answer

The given expression is an example of a Cobb-Douglas utility function, which is characterized by a multiplicative form and constant elasticity of substitution between goods or factors.

Question 10

Use the following chart to complete this exercise.Q represents the quantity demanded and P represents the price level.
  
a)Graph the data using a spreadsheet such as Microsoft Excel or Apple Numbers.
b)Using the regression tool in Excel,regress price on quantity.
c)Using your equation,if the price per cookie was 30¢,what is the consumer surplus?
d)What is the elasticity of demand at this point?

Accepted Answer

The answer of Use the following chart to complete this...

Question 11

The individual demand curve for a commodity is given by the equation P = X - Q/2,where X is the choke price (price at which quantity demanded is zero).Derive the consumer surplus when the price of the commodity is $5 and X = 10.Using the same demand equation,determine how the consumer surplus will change if price falls to $3 per unit.

Accepted Answer

The answer of The individual demand curve for a commodity...

Question 12

Each day a precocious pre-schooler eats lunch at school using the $1 lunch allowance given by his parents.He only likes Twinkies (T)and orange slices (S),which provide him utility according to the utility function  .
a)Derive the demand functions for S and T.Let  represent income,  the price of T winkies,and   the price of slices.
b)If Twinkies cost $0.10 each and slices are $0.25 each,how should the pre-schooler spend the $1 his parents give him in order to maximize his utility? Assume fractional units are possible.What is his maximum utility level?
c)How would the price of Twinkies affect the demand for Slices?

Accepted Answer

The answer of Each day a precocious pre-schooler eats lunch...

Question 13

Suppose coffee and cream are perfect,two-for-one complements and Jack spends his budget of $12 per day on these two goods.That is,assume that Jack likes one ounce of cream for every two ounces of coffee.The price of cream is $2 per ounce.The price of coffee is also $2 per ounce.(It's a fancy coffee shop. )
a)Graph Jack's budget line and at least two of his indifference curves.
Label the lines appropriately and identify the values of the intercepts.
b)What is Jack's optimal consumption choice? That is,how many ounces of coffee and cream would maximize his utility?
c)What will be the income and substitution effects of an increase in the price of cream to $4 per ounce?
d)Find Jack's demand curve for cream.Assume the price of coffee is still $2 and income is $12.

Accepted Answer

The answer of Suppose coffee and cream are perfect,two-for-one complements...

Question 14

With respect to the ordinary least-squares technique of estimating an equation,
"best fitting" means that the estimated equation line will:

Accepted Answer

"Best fitting" means that the estimated equation line will be as close as possible to the observed data points. This is achieved through the ordinary least-squares technique by minimizing the sum of the squared distances between the estimated line and observed data points.

Question 15

Positive network effects are often viewed as a two-edged sword for firms because they:

Accepted Answer

Positive network effects can lead to higher market share for a firm as more customers adopt the product or service, but at the same time, it can limit the firm's ability to raise prices. This is because customers become more dependent on the network, and any attempt to raise prices may cause them to switch to a competitor, resulting in lower market share. Therefore, firms need to be careful in managing network effects to balance the benefits of increased market share with the risk of limiting their ability to increase prices.

Question 16

Suppose you have quantity (Q)on the horizontal axis and price (P)on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

Accepted Answer

The answer of Suppose you have quantity (Q)on the horizontal...

Question 17

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

Accepted Answer

The answer of Let Jack's demand curve for coffee be...

Question 18

The estimated demand function for ice cream cones, 
,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

Accepted Answer

The answer of The estimated demand function for ice cream...

Question 19

Mariana has a preference for exquisite handcrafted jade ornaments imported from Japan.She displays her possessions at social gatherings and feels proud when her friends compliment her on the same.When approached by her friends for the source of these ornaments she indirectly refuses to reveal it by diverting the conversation to other things.She feels that once her friends start purchasing similar ornaments the exclusivity of her collection will be lost.Explain Mariana's behavior within the context of the demand theory.

Accepted Answer

The answer of Mariana has a preference for exquisite handcrafted...

Quiz 4: Individual and Market Demand

Limitations of using experimentation to estimate demand elasticities include:

The demand function for good C is derived from the utility function,U = C^$\alpha$M^{$\alpha$ -1} depends upon:

To economists,survey data is not always reliable because:

A consumer's demand function for a good Q is of the form P = 20 - 2Q.Derive the consumer's price elasticity of demand for this good when price decreases to $6 from $8.What can be inferred about the shape of the consumer's price consumption curve?

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Q_i,where P is price per unit and Q_i is the number of units demanded by the i^th consumer.What is the equation for the market demand curve?

The exponents of a Cobb-Douglas utility function,U = C^$\alpha$M^{$\alpha$ -1},represent:

Which of the following methods is not generally relied upon to estimate demand?

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

U = C^$\alpha$M^{$\alpha$ -1} is an example of a:

With respect to the ordinary least-squares technique of estimating an equation, "best fitting" means that the estimated equation line will:

Positive network effects are often viewed as a two-edged sword for firms because they:

Suppose you have quantity (Q) on the horizontal axis and price (P) on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

The estimated demand function for ice cream cones, ,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

Quiz 4: Individual and Market Demand

Limitations of using experimentation to estimate demand elasticities include:

The demand function for good C is derived from the utility function,U = C α\alphaα M α\alphaα -1 depends upon:

To economists,survey data is not always reliable because:

A consumer's demand function for a good Q is of the form P = 20 - 2Q.Derive the consumer's price elasticity of demand for this good when price decreases to $6 from $8.What can be inferred about the shape of the consumer's price consumption curve?

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Qi,where P is price per unit and Qi is the number of units demanded by the ith consumer.What is the equation for the market demand curve?

The exponents of a Cobb-Douglas utility function,U = C α\alphaα M α\alphaα -1,represent:

Which of the following methods is not generally relied upon to estimate demand?

In the country of Aldeine,the market demand for Good A is derived from the individual demand curves of five consumers who consider A to be a Giffen good.Determine the shape of the market demand curve for A.How it is different from the market demand curve for normal goods.

U = C α\alphaα M α\alphaα -1 is an example of a:

With respect to the ordinary least-squares technique of estimating an equation, "best fitting" means that the estimated equation line will:

Positive network effects are often viewed as a two-edged sword for firms because they:

Suppose you have quantity (Q) on the horizontal axis and price (P) on the vertical axis.After running an ordinary least squares regression you have the following results: Q = 100 - 0.02P.The slope of this equation is:

Let Jack's demand curve for coffee be given by P = 20 - Q,where P is price per cup and Q is quantity consumed per month.If Jack's monthly income is $2,500 and the price of a cup of coffee is $2,how much will consumer surplus fall if the coffee shop raises the price to $4 per cup?

The estimated demand function for ice cream cones, ,is based on a sample of 50 children.If the price of an ice cream cone increases by $1,by how much does the quantity demanded of ice cream cones change on average?

The demand function for good C is derived from the utility function,U = C^$\alpha$M^{$\alpha$ -1} depends upon:

Suppose there are 20 identical consumers in a market,each with demand curve given by P = 100 - 4Q_i,where P is price per unit and Q_i is the number of units demanded by the i^th consumer.What is the equation for the market demand curve?

The exponents of a Cobb-Douglas utility function,U = C^$\alpha$M^{$\alpha$ -1},represent:

U = C^$\alpha$M^{$\alpha$ -1} is an example of a: