Question
1.Functional Forms .Computer Project #3 covered functional forms estimated for a demand function.The following functional forms were estimated: M1.Q= -100 + -12(PB) + 40(Y) +
1.Functional Forms.Computer Project #3 covered functional forms estimated for a demand function.The following functional forms were estimated:
M1.Q= -100 + -12(PB) + 40(Y) + -5.0(PO)
M2.Ln(Q) =4.0 +-0.05(PB) + 0.2(Y) + -.06(PO)
M3.Ln(Q) = 11 + -0.09(Ln(PB)) + 1.8(Ln(Y)) + -0.11(ln(PO))
M4.Q = -180 + 40(1/PB) + 45(Y) + -10(PO)
where, Q = gallons of beer consumed per year, PB = price per gallon of beer ($'s), Y = income($1000's) and PO = the price of another good ($'s).
a.Determine the impact of the price and the income variable in M1.Be specific in terms of units.
b. Same question for M2.
c. What is the estimated price elasticity from M3.Is the demand elastic, inelastic or unit-elastic.
d.What is the estimated income elasticity from M3.Is beer a normal or inferior good?
e. Based on all four models, is the other good a substitute or complement to beer.
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