Answer to Question #169988 in Microeconomics for isaac mensah

Question

Suppose the following is an estimate of Ghana’s market demand curve for fish from 2017 to 2020. 𝑄𝑑 = 200 − 0.2𝑃𝑓 − 0.1𝑃𝑏 + 0.02𝑌 Where: 𝑄𝑑is the quantity of fish sold in tonnes per week. 𝑃𝑓 is the price of fish (in Ghana cedi per tonne) 𝑃𝑏 is the price of beef (in Ghana cedi per tonne) 𝑌 is annual personal disposable income per head (in Ghana cedis). (A) Explain, in a maximum of ONE sentence, what the following constant and coefficients in the demand equation means (i) 200 (ii) _0.2 (iii) _0.1 (iv) 0.02

Answer 1

(i) The constant of 200 of the demand equation means the value that takes into account all relevant non-specified factors that affect demand for fish;

(ii) The $P_f$ component of the demand equation has a negative sign which means that with each cedi increase per tonne of fish, quantity demanded for fish will drop by 0.2 tonnes per week;

(iii) The $P_b$ component of the demand equation has a negative sign which means that with each cedi increase per tonne of beef, quantity demanded for fish will drop by 0.1 tonnes per week;

(iv) The $Y$component of the demand equation has a positive sign which means that with each cedi increase of annual personal disposable income per head, quantity demanded for fish will increase by 0.02 tonnes per week.