Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 3, Problem 8CACQ
To determine
The approximate 95% confidence interval for the true values of a and b when inverse demand function is given.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
All questions utilize the multivariate demand function for Smooth Sailing sailboats in C6 on text page 83. Compute to three decimal places.
Initial values are: PX = $9500 PY = $10000 I = $15000 A = $170000 W = 160
This function is: Qs = 89830 -40PS +20PX +15PY +2I +.001A +10W
1.(a). Use the above to calculate the arc price elasticity of demand between PS = $9000 decreasing to PS = $8000. The arc elasticity formula is:
1.(b). Judging from the computation in (a), do you expect the revenue resulting from the decrease in Ps to $8000 to increase, remain the same, or decrease relative to the revenue at Ps = $9000. (Hint: see the table on page 65 of Truett). Explain your choice.
1.(c). Calculate the point elasticity of demand for Smooth Sailing sailboats at PS = $9000 (which should make Qs = 101600). The formula is:
1.(d). Does this elasticity value indicate that Smooth Sailing demand is relatively responsive to changes in the price of these sailboats? Explain…
A large company in the communication and publishing industry has quantified the relationshipbetween the price of one of its products and the demand for this product as Price = 150 − 0.01× Demand for an annual printing of this particular product. The fixed costs per year (i.e., perprinting) = RM50,000 and the variable cost per unit= RM40.
a) Analyze what is the maximum profit that can be achieved if the maximum expected demand is 6,000 units per year.
b) Compute what is the unit price at this point of optimal demand.
Wharton Econometric Forecasting, LLC has been hired to analyze demand in 30 regional markets for Product Y, a major item. A statistical analysis of demand in these markets shows (standard errors in parentheses):
QY = 26,950 − 450P + 220PX + 0.08A + 0.01I
(11,000) (150) (180) (0.3) (0.05)
R2 = 0.95
Standard Error of the Estimate = 10
Here, QY is market demand for Product Y, P is the price of Y in dollars, A is dollars of advertising expenditures, PX is the average price in dollars of another (unidentified) product, and I is dollars of household income. In a typical market, the price of Y is $100, PX is $70, advertising expenditures are $50,000, and the average family income is $60,000.
1. Which variables in this regression model are statistically significant at the 95 percent confidence level? Show your work.
Chapter 3 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
Ch. 3 - Prob. 1CACQCh. 3 - The demand curve for a product is given by...Ch. 3 - Prob. 3CACQCh. 3 - Suppose the own price elasticity of demand for...Ch. 3 - Suppose the cross-price elasticity of demand...Ch. 3 - You are the manager of a firm that receives...Ch. 3 - A Quant jock from your firm used a linear demand...Ch. 3 - Prob. 8CACQCh. 3 - Prob. 9CACQCh. 3 - Prob. 10CACQ
Ch. 3 - Prob. 11PAACh. 3 - Prob. 12PAACh. 3 - For the first time in two years, Big G (the cereal...Ch. 3 - Prob. 14PAACh. 3 - You are a division manager at Toyota. If your...Ch. 3 - You are a manager in charge of monitoring cash...Ch. 3 - As newly appointed Energy Czar. your goal is to...Ch. 3 - As the owner of Barneys Broilers—a fast-food...Ch. 3 - Prob. 19PAACh. 3 - With milk sales sagging of late. The Milk...Ch. 3 - Prob. 21PAACh. 3 - Prob. 22PAACh. 3 - Prob. 23PAA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Wharton Econometric Forecasting, LLC has been hired to analyze demand in 30 regional markets for Product Y, a major item. A statistical analysis of demand in these markets shows (standard errors in parentheses): QY = 26,950 − 450P + 220PX + 0.08A + 0.01I (11,000) (150) (180) (0.3) (0.05) R2 = 0.95 Standard Error of the Estimate = 10 Here, QY is market demand for Product Y, P is the price of Y in dollars, A is dollars of advertising expenditures, PX is the average price in dollars of another (unidentified) product, and I is dollars of household income. In a typical market, the price of Y is $100, PX is $70, advertising expenditures are $50,000, and average family income is $60,000. Use the estimated demand function to calculate the expected value of QY in a typical market. Calculate the 95% confidence interval within which you would expect to find actual values of sales.…arrow_forwardA statistician has estimated the following demand function for the demand faced by firm X: Q = 150 – 5.4P +0.8A + 2.8Y – 1.2PZ where Q is the quantity demanded of product X and P is the price of, A is X's advertising expenditure, Y is consumer income per capita, and PZ is the price of firm Z's product. (a) If at price P = 10 demand is Q = 100 (with all other factors fixed), where and by what percentage should firm X change price to increase its revenue by 20%? (b) If advertising expenditure A is increased by 5000, how and by how much will the demand for Q be affected? (c) What is expected to be the ratio of the goods of firms X and Z?arrow_forwardThe multivariate demand function below will be needed for questions 12-18. Setting: Grapple, Inc. is a leading seller of laptop personal computers. However, they want to become a leading tablet seller, too. Your marketing department, aided by your economics staff, has estimated a function to help you in the quest for market leader in tablets. The variables are defined after the function. Qg = 10000 - 25Pg + 20Ph + 30Pr - 15dv - 35Psc - 10Pmm + 0.05Ag + 0.03A -25C + 0.1Y Qg = the number of Grapple tablet computers demanded per week. Pg = the price of each new Grapple tablet (in $). Ph = the price of each Hewpaq tablet (in $). Pr = the price of each Ronova tablet. Pdv = the price to equip a tablet with Holographic digital video (in $, this is an upgrade option that enables three-dimensional graphics on a tablet. Two-dimensional graphics is standard equipment). Psc = the price of various screen sizes (in $, a 8 inch is standard, but upgrade options are 10…arrow_forward
- A large company in the communication and publishing industry hs quantified the relationship between the price of one of its products and the demand for this product as Price = 160 -0.01 xDemand for an annual printing of this particular product. The foxed costs per year (ie. per printing) = $4T 000 and the variable cost per unit = $35. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 7,000 units per year. The maximum profit that can be achieved is S. (Round to the nearest dolar.) The unit price at the point of optimal demand is S per unit (Round to the nearest cent)arrow_forwardQS A large sporting goods retailer with multiple stores is attempting to predict the demand for the latest in a seemingly never-ending stream of high-tech basketball shoes, the Nike-Bok Turbo Air-Pump. It is estimated that 300 pairs will be sold per day in the retailer's stores if the new shoe is priced at $200. At a price of $175; 375 pairs are expected to be sold. a) If price is plotted on the horizontal axis, determine the slope-intercept form of the equation for demand. b) Predict the expected demand at a price of $225. At a price $160. c) Identify the p-intercept and interpret its meaningarrow_forwardThe daily demand for a product X is estimated to be: Qd = 100 – 3P, + 4P,– 0.01M + 2A, Where P = the price of good X P, = the price of a related good Y A, = the amount of advertising spent on the good X M = the average income of the consumer. Suppose good X sells at GH¢25, good Y sells at GH¢35, the amount of advertising utilized is 60 units, and the average consumer income is GH¢20,000. Calculate and interpret the own price elasticity, cross price elasticity, income elasticity, and advertising elasticity of demand.arrow_forward
- CINESA, a government-owned power company that normally uses natural gas for electricity generation, is purchasing fuels other than natural gas and power from a commercially built wind farm, often at extra costs, which are transferred to the customer. Total monthly fuel and wind-power costs are now averaging $6,800,000. An engineer with the utility has calculated the average revenue for the past 24 months using three fuel-mix and wind-power situations: all gas, < 30% other or wind, and ≥ 30% other or wind. The table below shows the number of months for each situation and the associated revenue. If the same situation persists for the next 2 years, determine whether the utility’s revenue will be greater or less than the costs and by how much. Fuel/Wind Situation Months in Past 24 Average Revenue, $/Month All gas 12 $5,270,000 < 30% other/wind 9 $7,850,000 ≥ 30% other/wind 3 $12,130,000arrow_forwardA producer of outdoor clothing used a focus group to obtain information about the demand for fleece jackets with built-in battery operated warming panels. At prices of $100, $90, $80, $70, $60, and $50, the focus group demanded 23, 31, 40, 44, 48, and 60 jackets, respectively. Use the Excel trendline option to estimate a linear demand function and to determine the associated R² statistic. (Hint: Using Excel's scatterplot with trendline functionality, list price in the first column and quantity in the second column. Price will appear on the horizontal axis in this case.) The linear demand function is -0-0 p. (Enter your responses rounded to two decimal places.)arrow_forwardWastewater samples taken from an industrial discharge had the chemical oxygen demand (COD) concentrations below in mg/L. Determine the (a) arithmetic mean (by hand and spreadsheet), (b) median, (c) mode, and (d) standard deviation (by hand and spreadsheet). COD values: 452, 364, 415, 395arrow_forward
- Estimate the average revenue A company sells two products whose demand functions are given by x1 = 500 – 2. 5p1 and x2 = 750 – 3p2 The total revenue is given by R = X1P1 + X2P2 Estimate the average revenue when price p, varies between $25 and $50 and price P2varies between $75 and $125.arrow_forwardThe law of supply-and-demand is an important principle in economics. If the price of a product increases, the quantity supplied will rise as more producers attempt to capitalise on the increased price. However, if supply increases then price will decrease, as more suppliers creates more competition. A mathematical model for the relationship between the price Pa and quantity Q. at yearly intervals is the system of difference equations, Pn+1 P-0.1(Q. - 500), Qn+1=Qn +0.2(P-100), M (7a) (7b) where n represents the year. (a) What do the constants -0.1 and 0.2 in Equations (7a) and (7b) represent? (b) Find all combinations of equilibrium values, (p, q), associated with the differenc equation model, Equation (7). What do the equilibrium values represent?arrow_forwardThe demand function for Newton’s Donuts has been estimated as follows:Qx = -14 – 54Px + 45Py + 0.62Ax where Qx represents thousands of donuts; Px is the price per donut; Py is the average price per donut of other brands of donuts; and Ax represents thousands of dollars spent on advertising Newton’s Donuts. The current values of the independent variables are Ax=120, Px=0.95, and Py=0.64.Show all of your calculations and processes. Describe your answer for each question in complete sentences, whenever it is necessary. Calculate the price elasticity of demand for Newton’s Donuts and describe what it means. Describe your answer and show your calculations. Derive an expression for the inverse demand curve for Newton’s Donuts. Describe your answer and show your calculations. If the cost of producing Newton’s Donuts is constant at $0.15 per donut, should they reduce the price and thereafter, sell more donuts (assuming profit maximization is the company’s goal)? Should Newton’s Donuts spend…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education