DEMAND INTERPRETATON EXERCISE

Name ___________________________ Due __________________

Analyze the demand function for Toyotas in problem C4, page 82.Please also read "What is a Symbol" located in the folder with this assignment.

This function is:

Q_T = 200 -.01P_T +.005P_M -10P_G +.01I +.003A

1.Characterize this function by circling all in the following list that are applicable:

univariate, bivariate, multivariate, linear, exponential, logarithmic, curvilinear, 1^st degree, 3^rd degree, additive, multiplicative, linearly homogeneous

2.What is the numerical value of the partial derivative of the function with respect to the price (P_M) of Mazdas (be sure to also include the + or - sign.Note: I do not want the symbol for this partial derivative)?

3.Write the mathematical symbol representing the coefficient of advertising (A)(the numerical value of this coefficient is +.003, but the answer you give is to be the symbol representing this partial derivative).

4.Assuming there is a $1 increase in advertising expenditures (A), what change in Toyota demand will result (give the numerical value, too)?

5. Is gasoline a substitute for or complementary to Toyotas?What feature of the function tells you?

6.Are Mazadas substitutes or complements to Toyotas?What feature of the function tells you?

7.Is a Toyota a normal or an inferior good?What feature of the function tells you?

8.Assuming there is a $1000 Toyota price (P_T) decrease, what change in quantity demanded of Toyotas will result (give the numerical value, too)?

9.Assuming there is a $1000 increase in average family income (I), what change in Toyota demand will result (give the numerical value of it, too)?

10.Assuming there is a $1000 decrease in the price of Mazdas (P_M), what change in Toyota demand will result (give the numerical value of it, too)?