A client has provided data on the price of cars, the price of gasoline, the quantity of new cars sold in USA. Gross Domestic Product per capita is also observed. Using regression technique, use the data to estimate the following log linear market demand equation for new cars.
ln Q(cars) = 5 - 2.4 ln P(cars) - 1.2 ln P(gasoline) = 0.5 ln (GDP per capita)
1. What is the estimated elasticity of demand for new cars with respect to the price of cars?
2. What is the estimated elasticity of demand for new cars with respect to the price of gasoline? What happens to the quantity of new cars sold if the price of gas increases by 5%?
3. What is the estimated elasticity of demand for new cars with respect to GDP per capita?
Elasticity of Demand = E = % Change in Quantity demanded / % Change in Price = (dQ/dP)*(P/Q) = del(ln Q) / del(ln P),
where "del" is the partial derivative.
1. Ec = Elasticity of ...
This solution is a detailed step-by-step explanation of computing the Elasticity of Demand of cars with respect to price of cars, price of gasoline and the GDP.
Oil/Petroleum industry's price elasticity of supply and demand
*Research the Oil/Petroleum industry's price elasticity of supply and demand.
- Is price elasticity of demand considered elastic or inelastic?
- Are there substitutes available
- Is the good a luxury or a necessity
- What is the price elasticity of supply
*Research any negative or positive externalities the Oil/Petroleum industry produces.
- Research any negative or positive externalities the industry produces.
- Does the transaction of a buyer and seller directly affect a third party?
- Is the effect a negative or positive externality?
- How does the externality impact the economy?
- Research whether the industry produces public goods or private goods, or is a
- Are the goods or resources rival, excludable, or neither?
*Research how wage inequality is measured and if it is present in the Oil/Petroleum industry.
- Describe any current or past news events related to wage inequality.
- What was the industry's method for determining that there was an inequality?
*Research monetary and/or fiscal policies that have affected the Oil/Petroleum industry.
- How have these policies affected the employment rates for your chosen industry?
- How have these policies affected the growth of the industry?
- How have these policies affected the prices of the product the industry produces?