Point Price and Income Elasticities for Household Furniture
Not what you're looking for?
Estimate of the demand function for household furniture
F = 0.0036Y^1.08*R^0.16*P^−0.48
R^2 = 0.996
Where:
F=furniture expenditures per household
Y=disposable personal income per household
R=value of private residential construction per household
P=ratio of the furniture price index to the consumer price index
Question A) Determine the point price and income elasticities for household furniture.
Question B) What interpretation would you give to the exponent for R? Why do you suppose R was included in the equation as a variable?
Question C) If you were a supplier to the furniture manufacturer, would you have preferred to see the analysis performed in physical sales units rather than dollars of revenue? How would this change alter the interpretation of the price coefficient, presently estimated as − 0.48?
Purchase this Solution
Solution Summary
Point price and income elasticity for household furniture are determined. The interpretation to be given for an exponent is determined.
Solution Preview
a. Ed = -.48 (exponent of P)
Ey = 1.08 (exponent of Y)
b. The percentage change in furniture ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.