Elasticity Estimation. Breakaway Tours, Inc., has estimated the following multiplicative demand function for packaged holiday tours in the Flushing, NY, market using quarterly data covering the past five years (20 observations).
(ss) = subscript (SS) = superscript
Q(ssy) = 5P(ssy)(SS-2.5)P(ssx)(SS1)A(ssy)(SS2)A(ssx)(SS1)I(SS2)
R^2 = 0.90, standard error of the estimate = 10
Here, Q(ssy) is the quantity of tours sold, P(ssy) is average tour price, P(ssx) is average price for some other good, A(ssy) is tour advertising, A(ssx) is advertising of some other good, and I is per capita disposible income. The standard errors of the exponents in the preceeding multiplicative demand function are:
b(ss p ss y) = 0.5(ssy)b(ssp ssx) = 0.55(ssy)b(ssA ssy) = 0.8(ssy) b(ssA ssx) = 0.6(ssy) and b(ssI) = 0.8
A. Is tour demand elastic with respect to price
B. Are tours a normal good?
C. Is X a complement good or substitute good?
D. Given your answer to e part C, can you explain why the demand effects of A(ssy) and A(ssx) are both positive?
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Solve elasticity estimation
Elasticity of Demand
The Olde Yogurt Factory has reduced the price of its popular Mmmm Sundae from $2.25 to $1.75. As a result, the firm's daily sales of these sundaes have increased from 1,500/day to 1,800/day. Compute the arc price elasticity of demand over this price and consumption quantity range.
I just need assistance with the consumption quantity range part.
Thank you for your assistance!