When Estimating a Demand Function for a Good Where Quantity

question 54

Multiple Choice

When estimating a demand function for a good where quantity demanded is a linear function of the price, you should

• A)not include an intercept because the price of the good is never zero.
• B)use a one-sided alternative hypothesis to check the influence of price on quantity.
• C)use a two-sided alternative hypothesis to check the influence of price on quantity.
• D)reject the idea that price determines demand unless the coefficient is at least 1.96.

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