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The Alpine Bagel Co. is evaluating pricing for Bagels in it's outlet in the student commons. Their in-house consulting team estimated that the daily demand for Bagels in the area to be the following

Q = -15P + 10Ps - 20Pc +16I

Where P = the price of bagels, Ps = the price of scones (each), Pc = the price of coffee (per cup), and I = Income (average annual disposable income, for students in thousands of dollars)

a. Comment on this estimated demand function. Are the signs of the parameters reasonable? Why or why not? (Restrict your commentary to the negative or positive signs on the parameter coefficient

Reasonable Sign? (Y/N) Reason

b. Suppose that the price of scones = $3, coffee costs $2 per cup, and average annual disposable income for students is $10,000. Calculate the inverse demand curve (e.g., for the latter express price as a function of quantity. NOTE ALSO - be certain to enter income appropriately - how is income denominated?)

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9479139

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