The multivariate demand function (below) is needed for questions 6-12. Setting:
ID: 2429452 • Letter: T
Question
The multivariate demand function (below) is needed for questions 6-12. Setting: U.S. Auto manufacturers are trying to develop a multivariate function with which to estimate the demand for their gas-electric hybrid compact cars. Here is one that Motors Genera developed for its Jolt: Qi-65000-20Pi + 20Pf + 35Pt-5Pb + 0.2Tc + 0.05Y + 10Mg + 0.04A Where: Oi the number of Jolts demanded per week. PL = the price of each new Jolt (in $) Pf- the price of each new Ford gas-electric hybrid (in S). Pt- the price of each new Toyota gas-electric hybrid (in $). Pb- the price of replacement batteries for the Jolt (in S). Tc -the amount of tax credit incentive offered with the purchase of a new hybrid (in S) Y average weekly disposable income of a typical Jolt purchaser (in S). Mg the miles per gallon of gas rating of the Jolt (in miles per gallon), A E average weekly Jolt advertising expenditure (in S) 6. If all variables remain unchanged except that the price of Jolts (Pi) increases by $1000, then the quantity demanded of Jolts will: 7. If all variables remain unchanged except that the average weekly disposable income (Y) increases by $350 then demand for Jolts will: S. You can tell by looking at the sign of the price of Toyota hybrids (P) that they are consideredExplanation / Answer
6)
Coefficient of price of Jolts is - 20 that suggests that price and quantity have inverse relation. Increase in price will lead to fall in demand.
Fall in demand will be = -20*1000
= 20,000
Right answer is : (A)
7)
Disposable income coefficient is 5 % and positive related
Hence, increase in demand would be = 350*0.05
= 17.5
Demand will increase by 17.5
Right answer is : (C)
8)
Since is positive that implies that Toyota hybrid is substitute.
Right answer is : (A)