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4) annual demand and supply for the entronics company is given by:
qd = 5,000 + 0.5 i + 0.2 a - 100p, and qs + -5,000
+ 100p
where q is the quantity per year, p is price, i is income per household, and a is advertising expenditure.
a. if a = \$10,000 and i = \$25,000, what is the demand curve?
b. given the demand curve in part a., what is
equilibrium price and quantity?

5 the owner of a produce store found that when the price of a head of lettuce was raised from 50 cents to \$1, the quantity sold per hour fell from
18 to 8. the arc elasticity of demand for lettuce
a) -0.56. b) -1.15. c) -0.8. d) -1.57.

6) the initial price of a cup of coffe is \$1, and at that price, 400 cups are demanded. ifthe price falls to \$0.90, the quantity demand will increase to 500.
a. calculate the (arc) price elasticity of demandfor coffee.
b. based on your answer, is the demand for coffee elastic or inelastic?
coffee is increased by 10%, what will happen to
the revenues from coffee? carefully explain how you know.
the following questions refer to this regression equation. (standard errors in parentheses.)
qd = 15,000 - 10 p + 1500 a + 4 px + 2 i, (5,234)
(2.29) (525) (1.75) (1.5)

r2 = 0.65
n = 120
f = 35.25
standard error of y estimate = 565
q = quantity demand
p = price = 7,000
a = advertising expense, in thousands = 54
px = price of competitor's good = 8,000
i = average monthly income = 4,000
7) calculate the elasticity for each variable.
8) calculate t-statstics for each variable.
9) how is the r2 value calculated?
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