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1. Classify the relative Price Elasticity of Demand (Ep) (Elastic, Unitary or Inelastic) for each of the following products. Be sure to provide a complete and logical set of economic reasons that...

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1. Classify the relative Price Elasticity of Demand (Ep) (Elastic, Unitary or Inelastic) for each of the following products. Be sure to provide a complete and logical set of economic reasons that support the chosen classification of the price elasticity of demand.
a. Cable TV (Premium Channel Package)
. Electricity to power home uses (appliances, heating & cooling, computers, etc.)
c. Restaurant meals
d. U
an rail transit during rush hou
2. Using alternative values for the Income Elasticity of Demand (Ei) (Negative, Zero, Positive, or strongly Positive [Ei > 1.0]), classify the Ei for each of the following products as inferior, normal, luxury or neutral (sticky) goods. Be sure to provide a complete and logical set of economic reasons that supports the chosen classification of the income elasticity of demand.
a. A two-week vacation in Bermuda
. Purchasing a new vehicle
c. Second-hand clothes from a thrift store
d. Kitchen and household appliances

3. Using the co
ect relative value of the Cross Price Elasticity of Demand (Ex) (+, −, or 0) for each of the following products, please identify the expected economic relationship (complements, substitutes, or unrelated) between the following product pairs. Be sure to provide a complete and logical set of economic reasons that supports the chosen classification of the cross price elasticity of demand.
a. Fish and Chips (in the UK)
. E-books and E-Book Readers
c. Taxi Service and Uber Service
d. New furniture and New clothes
4. The MTA did a study on Cross Price Elasticity (Ex) to determine the sensitivity of MTA ridership to fees charged by Uber and Lyft. The study revealed this value:
                Ex = +1.82
Given the above Ex value, should the MTA managers be concerned about its own ridership if Uber and Lyft both announce considerable fee decreases for their services? Why? Defend your answer.
5. A pharmaceutical company introduced a new life-saving medication onto the market. The company did a study on the Price Elasticity of Demand (Ep) to determine the sensitivity of consumers to changes in the price of the medication. The study revealed the absolute value of the Ep to be:
                Ep = 0.095
Given the above Ep absolute value, what action is the pharmaceutical company likely to take to influence its total revenue from the sale of the medication? Why? Explain your reasoning.
6. When performing Linear Regression to estimate the Law of Demand in a market, please accurately explain the following procedures:
a. What is the role of the Ordinary Least Squares (OLS) procedure, and why is it considered to be a reasonable method of estimation?
. When using sample data to estimate a population-level relationship, why is it necessary to engage in hypothesis testing?
c. What are Type I and Type II e
ors, and why should researchers estimating demand relationships be concerned about these e
ors?
· Although I am not requiring a specific page length for each answer, I am expecting thorough answers that fully explain and defend your written response.
· Citations: You can reference the textbook itself as the source for your answers and also use notes from class. If you use additional outside sources, please document them, and defend why these outside sources are valid and appropriate.
1
Answered 3 days AfterMar 02, 2022

Solution

Ayushi answered on Mar 05 2022
75 Votes
5
Elasticity of Demand
Contents
1.    Price elasticity of demand:    3
2.    Income elasticity of demand:    3
3.    Cross price elasticity of demand:    4
4.    Cross price elasticity = +1.82    5
5.    Price elasticity of demand = 0.095    5
6.    Linear regression:    5
References:    7
1. Price elasticity of demand:
a. Cable TV (premium channel Package):
The demand of Cable TV (premium channel Package) is very elastic because if the price of the premium package would increase the consumers will shift to a basic package and can also choose for other alternatives like Netflix, Amazon prime and many other streaming platforms.
. Electricity to power home uses (appliances, heating & cooling, computers, etc.):
The demand for Electricity to power home uses (appliances, heating & cooling, computers, etc.) is highly inelastic because appliances, heating and cooling are some of the basic needs which are required for a good survival even if the prices of electricity goes slightly up or down it won’t cause any change in demand or there may be a minimal change in the ratio as there are no alternatives available for that.
c. Restaurant Meals:
The demand for restaurant meals is highly elastic as there are many alternatives available for restaurant meals and is not a basic necessity so if the prices change for the restaurant meals then there would be definite change in the demand ratio.
d. U
an rail transit during rush hour:
The demand for u
an rail transit during rush hour is inelastic as during the rush hour there are not much alternatives available and everyone is willing to pay a higher price in order to get the rail during the rush hour because of the necessity and lack of alternatives (Price Elasticity).
2. Income elasticity of demand:
a. A two week vacation in Bermuda:
A two week vacation in Bermuda is a luxury good and is not a basic necessity. So the Income elasticity of demand is strongly positive in this case as it would be affected largely by...
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