Macroeconomics Answers

What are the special properties of the Cobb-Douglas production function, and how might the function be used to calculate the sources of growth?

Qd = β0 +β1Psh +β2M+β3Pcg+β4Ax+ β5C

Where,

Qd = Quantity demand for a deluxe room in sh

Psh = Price of a deluxe room in sh (US$/room) = US$. 200.00

M = Visitors per capita income (US$/Day) = US$ 120

Pcg = Price of a deluxe room in CG (US$/room) = US$. 150.00

Ax = Average advertising expenditure in sh (US$/room) US$. 18.00

C = Customer Satisfaction Index = 8.56

DV: Q R- Square: 0.86 T table value 1.671

No of obse: 62 F- Ratio: 154.15

Var Para Esti SE

β0 127.8 49.6

β1 -1.3.0 0.42

β2 2.75 1.01

β3 2.55 1.21

β4 1.41 0.48

β5 1.85 0.23

a) Are estimated parameters comparable with economic theory? Explain

b) Construct the Total Revenue (TR) function of Sh hotel and determine the TR maximize demand

b) What are the significant parameters that could be impact on the demand for a deluxe room

c) Calculate and interpret, cross-price elasticity, income elasticity, and advertising elasticity of demand for a deluxe room

d) Calculate Adjusted R2 and interpret it.

You are the manager of a firm that receives revenue of Rs.30,000 per year from products X and Rs. 70,000 per year from product Y. The own-price elasticity of demand for product X is -2.5 and the cross-price elasticity of demand between product Y and X is 1.1. How much will your firm’s total revenue (revenues from both products) change if you increase the price of good X by 1 present?

1. Let j be 0. Suppose that the government increases expenditures by $100 × (1 + 0.01j) billion while increasing taxes by $100 × (1 − 0.01j) billion. Suppose that the MPC is 0.7 × (1 + 0.01j) and that there is no crowding out effect. What is the combined effects of these changes? Why is the combined change not equal to zero? 

Using figures, explain why expansionary monetary policy cannot increase output in the long run.

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Discuss the extent to which the traditional approach is an adequate model of exchange rate determination.

What are the special properties of the Cobb-Douglas production function, and how might the function be used to calculate the sources of growth?