ECON 3310 HW 4

Suppose the demand function is Q x d = 100 − 8P x + 6P y - M. If P x = $4, P y = $2, and M = $10, what is the cross-price elasticity of good x with respect to the price of good y?

0.17

If quantity demanded for sneakers falls by 10 percent when price increases 25 percent, we know that the absolute value of the own price elasticity of sneakers is:

0.4.

Suppose demand is given by Q x d = 50 − 4P x + 6P y + A x, where P x = $4, P y = $2, and A x = $50. What is the advertising elasticity of demand for good x?

0.52

The own price elasticity of demand for apples is −1.2. If the price of apples falls by 5 percent, what will happen to the quantity of apples demanded? a. It will increase 4.2 percent. b. It will fall 4.3 percent. c. It will increase 5 percent. d. It will increase 6 percent

It will increase 6 percent.

The statistical analysis of economic phenomena is defined as: a. econometrics. b. standard deviation. c. variance. d. confidence intervals.

econometrics.

Adjusted R Square Formula (B)

1-(SSR/(n-k)/(SST(n-1)

R- Square Formula (A)

1-(SSR/SST)

Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data? a. Adjusted R-square b. t-statistic c. R-square d. Neither the t-statistic, the R-square, nor the adjusted R-square

Adjusted R-square

You are the manager of a supermarket, and you know that the income elasticity of peanut butter is exactly −0.7. Due to the economic recession, you expect incomes to drop by 15 percent next year. How should you adjust your purchase of peanut butter? a. Buy 6.2 percent less peanut butter. b. Buy 2.14 percent more peanut butter. c. Buy 10.5 percent more peanut butter. d. Buy 9.8 percent less peanut butter.

Buy 10.5 percent more peanut butter.

Regression SS (SSE), Residual SS (SSR), Total SS (SST) Formula

SST = SSE + SSR

Which of the following provides a measure of the overall fit of a regression? a. The F-statistic and R-square b. t-statistic c. F-statistic d. R-square

The F-statistic and R-square

If the cross-price elasticity between goods A and B is negative, we know the goods are: a. inelastic. b. inferior goods. c. substitutes. d. complements.

complements.

The elasticity which shows the responsiveness of the demand for a good due to changes in the price of a related good is the: a. cross-price elasticity. b. log-linear elasticity. c. income elasticity. d. own price elasticity.

cross-price elasticity.

Assume that the price elasticity of demand is −2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to: a. remain constant. b. decrease. c. increase. d. either increase or remain constant, depending upon the size of the price increase.

decrease.

If the cross-price elasticity between ketchup and hamburgers is −1.2, a 4 percent increase in the price of ketchup will lead to a 4.8 percent: a. increase in quantity demanded of ketchup. b. drop in quantity demanded of hamburgers. c. increase in quantity demanded of hamburgers. d. drop in quantity demanded of ketchup

drop in quantity demanded of hamburgers.

As a rule of thumb, a parameter estimate is statistically different from zero when the absolute value of the t-statistic is: a. zero. b. less than one. c. greater than or equal to 2. d. greater than or equal to 1

greater than or equal to 2.

As we move down along a linear demand curve, the price elasticity of demand becomes more: a. elastic. b. inelastic. c. log-linear. d. variable.

inelastic

Regression df Formula (C)

k - 1

Total df Formula

n-1

Residual df Formula

n-k

Lemonade, a good with many close substitutes, should have an own price elasticity that is: a. unitary. b. relatively elastic. c. perfectly inelastic. d. relatively inelastic.

relatively elastic

Coefficient, Standard Error, t Stat Formula

t stat = Coefficient/ Standard Error

Which of the following is used to determine the statistical significance of a regression coefficient? a. t-statistic b. Adjusted R-square c. F-statistic d. R-square

t-statistic

The elasticity of variable G with respect to variable S is defined as: a. the percentage change in variable G that results from a given percentage change in variable S. b. the change in variable G that results from a given percentage change in variable S. c. the percentage change in variable G that results from a given change in variable S. d. the change in variable G that results from a given change in variable S

the percentage change in variable G that results from a given percentage change in variable S.

Suppose the demand for a product is lnQ x d = 10 − ln P x, then product x is: a. unitary elastic. b. elastic. c. inelastic. d. Cannot be determined without more information

unitary elastic.

The demand for good X has been estimated by Q x d = 12 − 3P x + 4P y. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity.

−0.6