(2) The income eldowery (3) The cross-price elasticity (ExR). 5. The following log-linear demand curve for a price-setting firm is estimated using the ordinary least-squares method: Q = apMcpd 270 PART II Demand Analysis Following are the results of this estimation: DEPENDENT VARIABLE: LNQ R - SQUARE - RATIO P-VALUE ON F OBSERVATIONS : 25 0. 8587 39 . 165 0. 0001 PARAMETER STANDARD ESTIMATE ERROR T - RATIO VARIABLE P - VALUE 6. 77 4.01 1 . 69 INTERCEPT 0 . 0984 LNP -1 . 68 0. 70 -2 . 40 0. 0207 LNM -0. 82 0. 2 -3.73 LNPR 1 .35 0. 75 1. 80 0.000 0. 0787 a. The estimated demand equation can be expressed in natural logarithms as In Q = - b. Does the parameter estimate for b have the expected sign? Explain. . 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? . Find the following estimated elasticities: (1) The price elasticity of demand (E). (2) The cross-price elasticity of demand (ExR). (3) The income elasticity of demand (EM). 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. 6. A linear trend equation for sales of the form