The following log-linear demand curve for a price-setting firm is estimated using the ordinary least-squares method:

Q = aP^bM^cP^d_R

Following are the results of this estimation:

a. The estimated demand equation can be expressed in natural logarithms as ln Q =_________.?

b. Does the parameter estimate for b have the expected sign? Explain.?

c. Given these parameter estimates, is the good a normal or an inferior good? Explain. Is good R a substitute or a complement? Explain.?

d. Which of the parameter estimates are statistically significant at the 5 percent level of significance??

e. Find the following estimated elasticities:?

(1) The price elasticity of demand (?).?

(2) The cross-price elasticity of demand (?_XR).?

(3) The income elasticity of demand (?_M).?

f. A 10 percent decrease in household income, holding all other things constant, will cause quantity demanded to_______ (increase, decrease) by_________ percent.?

g. All else constant, a 10 percent increase in price causes quantity demanded to ____________(increase, decrease) by__________ percent.?

h. A 5 percent decrease in the price of R, holding all other variables constant, causes quantity demanded to_________ (increase, decrease) by______________ percent.?

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DEPENDENT VARIABLE: LNQ R-SQUARE F-RATIO P-VALUE ON F OBSERVATIONS: 25 0.8587 89.165 0.0001 PARAMETER STANDARD VARIABLE ESTIMATE ERROR T-RATIO P-VALUE INTERCEPT 6.77 4.01 1.69 0.0984 LNP -1.68 0.70 -2.40 0.0207 LNM -0.82 0.22 -3.73 0.0005 LNPR 1.35 0.75 1.80 0.0787