The demand for hamburgers is estimated from this theoretical model:
Q = kPaIbAce,
where Q = units per day, P = price per unit, A = advertising budget per month by sellers, I = per capita income of consumers, and e = a random error. In a recent study, one researcher estimated the log-linear form of this equation with regression analysis as:
log Q = 2.5 - 0.33 log P + 0.15 log I + 0.2 log A.
Explain what the coefficients of log P, log I, and log A reveal about this product.
The coefficients of the variables are the respective elasticities of demand. The price elasticity is (-0.33), income elasticity is 0.15, and advertising elasticity is 0.2. These coefficients indicate that the product is relatively price inelastic, is a normal good, and is responsive to advertising outlays by sellers.
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For a commercial bank, the term "reserves" refers to
A) a banker's concern ("reservation") in making loans to an individual without a job. B) the profit that the bank retains at the end of the year. C) the cash in its vaults and its deposits at the Federal Reserve. D) the net interest that it earns on loans.
Explain why distributing $500 worth of food stamps to someone is not the same thing economically speaking as giving them $500 in cash? Why might the cash option make the poor better off than food stamps?
What will be an ideal response?