Refer to the Following:
the Following Linear Demand Specification Is $Q = a + b P + c M + d P _ { R }$

question 41

Multiple Choice

Refer to the following:
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:
$\begin{array}{rllll}\text { DEPENDENT VARIABLE: } & Q & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUEONF } \\\text { OBSERVATIONS: } 32 & 0.7984 & 36.14 & 0.0001\\\\\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & & \\& \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & 846.30 & 76.70 & 11.03 & 0.0001 \\\text { P } & -8.60 & 2.60 & -3.31 & 0.0026 \\\text { M } & 0.0184 & 0.0048 & 3.83 & 0.0007 \\\text { PR }& -4.3075 & 1.230 & -3.50 & 0.0016\end{array}$
For the next 2 questions suppose income remains at $10,000 but the price of the related good increases to $60 and Conlan decides to raise the price of its product to $50.
-What is the new own price elasticity of demand?

• A) -0.24
• B) -0.43
• C) -0.87
• D) -1.00
• E) -1.26

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Definitions:

Inventory Change

The difference in inventory levels between two time periods, reflecting purchases, sales, and usage.

Accrued Liabilities

Obligations that a company has incurred but not yet paid for, recognized in accounting to match expenses with the revenues they help to generate.

Indirect Method

A cash flow statement preparation approach that starts with net income and adjusts for non-cash transactions and changes in working capital.

Marketable Securities

Financial instruments that are easily convertible into cash and may include stocks, bonds, and Treasury bills.