Salvatore’s Chapter 5:
Problems: 8, 15(b) and (c), and appendix problem 2 (p. 215).
Problem 8: In a study published in 1980, B.B. Gibson estimated the
following price and income elasticities of demand for six types of
public goods.
a) Do these public goods conform to the law of demand? For which
public goods is demand price elastic?
b) What types of good are these public goods?
c) If the price or cost of college and university education increased
by 10% and, at the same time, incomes also increased by 10%, what
would be the change in the demand for college and university
education?
Problem 15: Starting with the data from Problem 6 and the data of
the price of a related commodity for the years 1986 to 2005 given
below, we estimated the regression for the quantity demanded of a
commodity (which we now relabel Qx), on the price of the
commodity (which we now label Px), consumer income (which we
now label Y), and the price of the related commodity (Pz), and we
obtained the following results
b) Evaluate the above regression results
c) What type of commodity is Z? Can you be sure?
Appendix problem 2:
a) Estimate the regression in Problem 5 based on Table 5-6 using
Excel’s regression function in the Data Analysis menu.