4b

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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 = -5000 + 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 is (support your answer):
a) -0.56. b) -1.15. c) -0.8. d) -1.57.


6) the initial price of a cup of coffee is $1, and at that price, 400 cups are demanded. if the price falls to $0.90, the quantity demanded will increase to 500.

a. calculate the (arc) price elasticity of demand for coffee.
b. based on your answer, is the demand for coffee elastic or inelastic?
c. based on your answer to a., if the price of 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 demanded
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-statistics for each variable.
9) how is the r2 value calculated?
10) the following are the actual sales for the last six periods:
period sales
1 750
2 820
3 600
4 850
5 900
6 700
if the exponential smoothing forecasting method is used, and the smoothing factor is 0.6, what will be the forecast for period 7? be careful here!!!
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