6. Data analysis Go to the excel sheet titled 03 - Production Data.xlsx in the m
ID: 1138406 • Letter: 6
Question
6. Data analysis Go to the excel sheet titled 03 - Production Data.xlsx in the modules section. In that file, you can find 3 columns for Q.K and L. First,use natural log transformation (using the function LN in excel to transform the entire data et to create 3 new columns for In Q, In K and In L. Then run a regression analysis with In Q being the Y or dependent variable and 11K In L being the X or independent variable. Once you are done with the regression, interpret the coefficients. What can you say about the returns to seale? 7. Give examples for the following production functions. Interpret them. Draw isoquants. Comment on their returns to scale (a) Fixed proportion inputs (b) Perfectly substitutable inputsExplanation / Answer
Answer: Part b
(b) At p=$75, price elasticity is greater than 1 because length of lower segment of the demand curve is more than the upper segment. Price elasticity of demand= length of lower segment of the demand curve divided by upper segment.
(c) At Q=75, price elasticity is less than 1 because length of lower segment of the demand curve is less than the upper segment.
(d) i. At any given p, price elasticity of demand will be same on both the demand curve. This is because at same price, the ratio of lower and upper segment will be same. Thus elasticity of demand is not same as the slope.
ii. At any given Q, price elasticity of demand will be more for the demand curve having less slope. This is due to difference in price corresponding to given quantity as the slopes are different.
(e) i. At any given price, lower demand curve will have more elasticity because quantity is more responsive to price.
ii. At any given quantity, both the demand curves will have the same elasticity due to the same ratio of lower and upper segment.
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