Why is the identification problem more likely with time-series estimates of demand?
What will be an ideal response?
Identification problems occur when it is possible that both demand and supply are shifting. Thus a series of observations is not identifying points along a single demand curve; it is identifying a series of equilibrium points that may or may not be along a single curve. This is most likely to be a problem in time series estimation of demand curves, simply because over any reasonably long time period it is quite likely that both supply and demand will change somewhat.
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If total consumer expenditures (in dollars) for bus transportation were to increase when the price of bus transportation was raised, the demand for bus transportation probably
A) had decreased. B) had increased. C) violated the law of demand. D) was elastic. E) was inelastic.
"Good news" about an expenditure-related indicator means that
A) it is higher than its previous value. B) it is higher than it was expected to be. C) it is lower than its previous value. D) it rose faster than the rate of inflation.
Two firms, each producing different goods, can achieve a greater output than one firm producing both goods with the same inputs. We can conclude that the production process involves
A) diseconomies of scope. B) economies of scale. C) decreasing returns to scale. D) increasing returns to scale.
Jaime’s income elasticity for science fiction novels is 1.2 and for mystery novel -1. For Jaime, science fiction novels are ____________and mystery novels are ____________:
a. normal; normal b. normal; inferior c. inferior; normal d. inferior; inferior