The Following Linear Demand Specification Is Estimated for Conlan Enterprises,a $Q = a + b P + c M + d P _ { R }$

question 8

Multiple Choice

The following linear demand specification is estimated for Conlan Enterprises,a price-setting firm: $Q = a + b P + c M + d P _ { R }$ where Q is the quantity demanded of the product Conlan Enterprises sells,P is the price of that product,M is income,and $P _ { R }$ is the price of a related product.The results of the estimation are presented below: Assume that the income is $10,000,the price of the related good is $40,and Conlan chooses to set the price of this product at $30.At the prices and income given above,what is the price elasticity of demand?

• A)-0.43
• B)-0.86
• C)-1.00
• D)-1.43
• E)-2.40

---

Definitions:

Subsidies

Financial support extended by the government to an economic sector, business, or individual, aimed at promoting beneficial activities or reducing costs.

Indirect Benefits

Advantages or gains that occur as a secondary effect of an action, activity, or policy, often not immediately apparent.

State-Supported Company

A business that receives special advantages, funding, or backing from the government.

Indirect Benefits

Advantages or gains not directly attributed to a particular action or investment but occurring as a secondary effect.