Part b (b) Suppose the vertical intercept of a linear demand is 100. What can yo
ID: 1135074 • Letter: P
Question
Part b (b) Suppose the vertical intercept of a linear demand is 100. What can you say about Jel at P-76 (e) Suppose the horizontal intercept of a linear demand is 100. What can you say about lel at Q-75 (d) Suppose two linear demand curves D and Da have the same vertical interept and D is steeper than D i. At any given P, which demand is more elastie? ii. At any given Q. which demand is more elastic? ) Suppose two linear demand curves D and D are parallel to each other and Di is higher than D i At any given P, which demand is more elastic ii. At any given Q, which demand is more elastic 3. What is the difference between a constant slope demand curve and a "constant elasticity demand curve? Give examples for each one of them Data analysis Go to the excel sheet titled Week 2 Data.xlsx in the modules section. In that file, you can find 3 columns for Q,P and 1. First, use natural log transformation (using the function LN in excel to transform the entire data set to create 3 new columas for In Q, In P and In I. Then run a regression analysis with In Q being the Y or dependent variable and InP, Inl being the X or indipendent variable (Make sure your data analysis package in excel is active, you can check that by going to the Options under Files tab in excel; if you need help with this regression, google it or set up an appointment with me.) Ouce you are done with the regression, interpret the B coefficients in ternas of elasticitiesExplanation / Answer
Answer: Part b
(b) At p=$75, price elasticity is greater than 1 because length of lower segment of the demand curve is more than the upper segment. Price elasticity of demand= length of lower segment of the demand curve divided by upper segment.
(c) At Q=75, price elasticity is less than 1 because length of lower segment of the demand curve is less than the upper segment.
(d) i. At any given p, price elasticity of demand will be same on both the demand curve. This is because at same price, the ratio of lower and upper segment will be same. Thus elasticity of demand is not same as the slope.
ii. At any given Q, price elasticity of demand will be more for the demand curve having less slope. This is due to difference in price corresponding to given quantity as the slopes are different.
(e) i. At any given price, lower demand curve will have more elasticity because quantity is more responsive to price.
ii. At any given quantity, both the demand curves will have the same elasticity due to the same ratio of lower and upper segment.