Exam 3: Measuring and Using Demand

Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?

All of the following are true regarding the price elasticity of demand except which one?

Big Poppa's BBQ Sandwiches is a local restaurant specializing in BBQ sandwiches. Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Q^d = 1,576.55 - (25.50 × P). The estimated regression equation suggests which of the following is true?

The larger the standard error for a coefficient, the larger the confidence level.

For any change in a business cycle, the percentage change in demand for a good with an income elasticity of 2.0 will be larger than the percentage change in demand for a good with an income elasticity of 1.0.

You are the manager of a local flower shop and you compete with one other flower shop in your area. You estimate the cross- price elasticity of demand between your flowers and your competitor's flowers to be 2.60. If your competitor decreases the price of her flowers by 2 percent, you should expect which of the following?

Consider a 20 percent increase in the price of a 2 pound bag of sugar and a 20 percent increase in the price of first- class airline travel. In response to the price changes, which of the following is most likely to be true?

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Q^d = 650 - (15.25 × P). The estimated regression equation suggests that if Big City Java increased its price of grand mocha coffees from $6 to $8, the predicted quantity demanded of coffees would _________.

If an 8 percent decrease in price leads to a 4 percent increase in the quantity demanded of the good, as a result of the price change, the total revenue for this product will________ .

An hypothesis test using 95 percent confidence has a significance level equal to __________.

If Excel estimates the demand function for a product to be: Q^d = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Q^d = 650 - (15.25 × P). The estimated regression equation suggests which of the following is true?

Regression analysis can help managers make decisions in the short run, but not in the long run.

If the absolute value of the t- statistic exceeds critical value, the null hypothesis is rejected.

The table above shows a sample of actual data used to estimate the demand function for Happy Clams seafood dinners. -Refer to the table above. Excel estimates the demand function for Happy Clams seafood dinners to be: Q^d = 1,200 - (20.50 × P). Which of the following statements is true?

If the income elasticity of demand for a good is 0.5, an economic recession will increase the demand for the good.

Omitting relevant variables from the regression analysis can bias the regression results.

You are the owner of a boutique clothing store and estimate the price elasticity of demand for your clothing to be 2.50 and the income elasticity of demand for your clothing to be 1.55. If you increase the price of your clothing, you should expect which of the following to occur?

The goal of regression analysis is to make the residuals as small as possible.

Using Excel, the manager of Quick Breaks Coffees has estimated the daily demand function for its regular coffees; the results are shown in the table above. Which of the following statements is correct?