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Estimating expected demand

A number of empirical studies of automobile demand yielded the following estimates of income and price elasticities

Study Income elasticity Price elasticity

Chow +3.0 -1.2
alkinson +2.5 -1.4
Roos and Von Szeliski +2.5 -1.5
suits +3.9 -1.2

Assume that income and price effects on automobile sales are independent and additive. Assume also that the auto companies intend to increase the average price of an automobile by about 6 percent in the next year and that next year's disposable personal income is expected to be 4 percent higher than this year's. If this year's automobile sales were 11 million units, how many would you expect to sold under each pair of price and income demand elasticity estimates

 

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9202829

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