Demand Shifts vs Movements
Income rises and ramen sales fall. What kind of good is ramen?
Inferior good
If elasticity is between 0 and -1, demand is ___?
Inelastic
If EY < 0, the good is ___?
Inferior good
If |E| = 1, demand is ___?
Unit (unitary) elastic
OLS minimizes the sum of what?
squared residuals
Which of the following shifts demand?
a) price of the good itself
b) consumer income
c) movement along
d) law of demand
consumer income
If the price of dolls falls by 10% and quantity rises by 25%, what is the elasticity?
-2.5 (elastic)
Pepsi and Coke have what sign for cross-price elasticity?
Positive (substitutes)
Optimal pricing rule uses what two key factors?
2. price elasticity
If R-squared = 0.586, how much of the variation is explained?
About 59% of variability in the regression is explained.
"You take shorter showers after water prices triple." - Is this a shift or a movement?
Upward movement along the demand curve
A vertical demand curve represents what type of elasticity?
completely (perfectly) inelastic
If popcorn sales fall 20% when movie tickets rise 10%, Ec=?
-2.0 (complements)
If MC = $60 and E = -5, what is the optimal price?
P = (E/(E+1)) x MC = (-5/-4) x 60 = $75
In regression, a small p-value (< 0.05) means what?
Reject null hypothesis, variable is significant.
A decrease in the price of playstation systems shifts demand for playstation games which way?
Rightward shift
If demand is P = 20 - 4Q and Q = 2, what is the point elasticity?
-1.5 (elastic)
Income increases by 10%, popcorn sales increase by 20%. What is EY?
2.0 (normal, luxury good)
If E = -2 and TC = 20 + 8Q, what is the markup price?
(-2/-1) x 8 = $16
With t = -4.45 and tcritical = 2.145, do we reject Ho at 5%?
Yes, reject (Ho) the null hypothesis.
A rise in pencil prices shifts demand for pens in what direction?
Rightward shift
If demand is elastic, what happens to total revenue when price increases?
Revenue decreases
If demand is elastic, a price decrease leads to what effect on revenue?
Revenue increases
Rainfall coefficient = 0.801, p = 0.03. At 5% level, is it significant?
Yes, it is significant.