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2. A client has provided you with data on the price of cars, the price of gasoline, the quantity of new cars sold in each of a number of countries. In addition you observe Gross Domestic Product per capita (GDP is a measure of national income and 'per capita' means per person.) You use the data to estimate the following log-linear market demand equation for new cars:
ln Qcars = 5 - 2.4 ln Pcars - 1.2 ln Pgasoline + 0.5 ln (GDP per capita)
a) What is the estimated elasticity of demand for new cars with respect to the price of cars?
b) What is the estimated elasticity of demand for new cars with respect to the price of gasoline?
c) What is the estimated elasticity of demand for new cars with respect to GDP per capita?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M91261533

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