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

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Definitions:

Supply

The complete volume of a specific commodity or service ready for consumption by customers.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single seller can influence the market price of goods.

Market

A Market is any structured system where economic transactions between buyers and sellers take place, including physical locations or virtual spaces.

Demand Curve

A visual depiction showing how the quantity of a product demanded is related to its price.