Suppose that an economist hypothesizes that the annual quantity demanded of a specific computer brand (Q D
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- Suppose that an economist hypothesizes that the annual quantity demanded of a specific computer brand (Q D ) is determined by the price of the computer (P) and the average income of consumers (Y) according to Q D = Y - 3P.
- a. Which of these variables are endogenous and which are exogenous if we were interested in constructing a theory that explains the determination of quantity demanded with emphasis on the effect of price?
- b. What does the negative sign before the term "3P" imply about the relationship between Q D and P? What does the implicit positive sign before the term Y tell you about the relationship between income and quantity demanded?
- c. Suppose for the moment that average income is given and equals $6,000. Rewrite the demand relationship by inserting this value into the given expression above.
- d. Assuming average income equals $6,000, calculate the values of Q D when P = 0, P = $500, P = $1,000, and P = $2,000.
- e. Put the relationship between P and Q D (assuming Y = $6,000) on the grid, putting P on the vertical axis. Indicate the intercept values (X-intercept and Y-intercept) on each axis.
- f. Assuming
Related Book For
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe
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