Essay
The following estimates have been obtained for the market demand for cereal:
ln Q = 9.01 - 0.68 ln P + 0.75 ln A - 1.3 ln M,where Q is the quantity of cereal,P is the price of cereal,A is the level of advertising,and M is income.Based on this information,determine the effect on the consumption of cereal of
a.A 5 percent reduction in the price of cereal.
b.A 4 percent increase in income.
c.A 20 percent reduction in cereal advertising.
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a.Since the own price elasticity is −0.6...View Answer
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