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ID: 2439098 • Letter: P
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Use the following data to answer the questions below.
Question 5
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a.) Using OLS, the estimated demand function (P=f(Q)) is
a. Q=2334.34?23.31P
b. P=1210?48.85Q
c. Q=52.50?0.05P
d. P=100.15?0.043Q
Question 6
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b.) Using algebra to invert the demand function, the demand function (Q=f(P)) is
Select one:
a. P=1130?52.50Q
b. Q=2334.34?23.31P
c. Q=100.15?15.38P
d. Q=6.51?0.007P
Question 7
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c. Using calculus to determine dQdP, construct a column which calculates the point-price elasticity for each (P,Q) combination. What is the point price elasticity of demand when P=$49.80?
Select one:
a. 1165
b. -0.043
c. 0.186
d. -0.996
P Q $52.50 1130 $50.75 1145 $49.80 1165 $49.15 1170 $48.85 1210Explanation / Answer
Ans a)
Demand Function will be
P=a+bQ
b=Sumof[(P-P_)(Q-Q_)]/Sumof(Q-Q_)^2
P_=Mean of P and Q_=Mean of Q
b=(-157.45)/3670=-0.043
a=P_+(-0.043)Q_=50.21+0.043(1164)=100.15
P=100.15-0.043Q
Option D is correct answer
Ans B)
Inverse Demand function Q=f(P)
Q=100.15/0.043-P/0.043=2329.06-23.25P
Option B is correct response our answer is close to it.
ANs C)
Elasticity=(dQ/dP)*(P/Q)
dQ/dP=-23.25 and when P=49.8 we have Q=2329.06-23.25(49.8)=1171.21
Elasticity=(-23.25)*(49.8/1171.21)=-0.996
Option D is correct response
P P-P_ Q Q-Q_ (P-P_)*(Q-Q_) (Q-Q_)^2 52.5 2.29 1130 -34 -77.86 1156 50.75 0.54 1145 -19 -10.26 361 49.8 -0.41 1165 1 -0.41 1 49.15 -1.06 1170 6 -6.36 36 48.85 -1.36 1210 46 -62.56 2116 50.21 1164 -157.45 3670