Using a Sample of 100 Consumers,a Double-Log Regression Model Was

question 12

Multiple Choice

Using a sample of 100 consumers,a double-log regression model was used to estimate demand for gasoline.Standard errors of the coefficients appear in the parentheses below the coefficients.
Ln Q = 2.45 -0.67 Ln P + .45 Ln Y - .34 Ln P_cars
(20) (.10) (.25)
Where Q is gallons demanded,P is price per gallon,Y is disposable income,and P_cars is a price index for cars.Based on this information,which is NOT correct?

• A)Gasoline is inelastic.
• B)Gasoline is a normal good.
• C)Cars and gasoline appear to be mild complements.
• D)The coefficient on the price of cars (P_cars)is insignificant.
• E)All of the coefficients are insignificant.

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Definitions:

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or commodity.

Gasoline Shortage

A situation where the demand for gasoline exceeds the supply available, often leading to price increases and long lines at fuel stations.

Binding Price Ceiling

A maximum legal price set below the equilibrium price, leading to shortages as the quantity demanded exceeds the quantity supplied.

Potential Buyers

Individuals or entities who have both an interest in and the capacity to purchase goods or services.