1)Suppose that E(p) = 2/3 , where p represents the price of an item

Subject:EconomicsPrice:4.88 Bought15

Share With

1)Suppose that E(p) = 2/3 , where p represents the price of an item. Then the demand is

a) Elastic

b) Inelastic

c) Unitary

d) None of the above.

2)A recent trend in the restaurant industry is to use locally produced foods. Consequently, you are interested in the estimating the demand and supply for locally produced burritos in college towns. You have collected data on the price of burritos in each town, the quantity of burritos sold, the income of students, the local price of beef, and the local price of salsa.

a. Carefully explain how you would use this data to construct a consistent estimate of both the slope of the supply curve and the slope of the demand curve. Be careful to specify your estimation method and each step you would use to estimate each curve.

b. How would your answer change if instead of slopes, we wanted to estimate the elasticity of supply and the elasticity of demand?