The Following Linear Demand Specification Is Estimated for Conlan Enterprises,a

question 31

Multiple Choice

The following linear demand specification is estimated for Conlan Enterprises,a price-setting firm: where Q is the quantity demanded of the product Conlan Enterprises sells,P is the price of that product,M is income,and is the price of a related product.The results of the estimation are presented below: 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:

Prevailing Interest Rates

are the current rates of interest which banks and other financial institutions charge on loans and pay on deposits.

Second Mortgages

A type of mortgage taken out on a property that is already mortgaged, generally used to access home equity.

First Mortgages

A primary lien against real property that takes precedence over all other mortgages or liens, except for statutory liens.

Assumes the Mortgage

Refers to when a person takes over the obligations of a mortgage from the original borrower under the terms of the original loan.