Use the dataset RuralLand.xls to test for Multicollinearity. Price is observed land price per acre excluding improvements; WL is the proportion of acreage that is wooded; DA is the distance from parcel to Sarasota airport; D75 is the distance form parcel to I-75; A is acreage of parcel; and MO is month in which the parcel was sold. Price is assumed to be dependent on these other factors.

Please provide a thorough walk through on analysis and any testing done as opposed to just posting the answers.

1. Data on price and sales volume in two different periods are given.

Calculate and interpret composite indices and their absolute differences. Was companies’ price politics right? What do you suggest for next month?

Q1. Price elasticity of demand measures

A) how responsive suppliers are to price changes.

B) how responsive sales are to changes in the price of a related good.

C) how responsive quantity demanded is to a change in price.

D) how responsive sales are to a change in buyers' incomes.

Q2. Suppose the value of the price elasticity of demand is -3. What does this mean?

A) A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.

B) A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

C) A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.

D) A $1 increase in price causes quantity demanded to fall by 3 units.

Q3. If the percentage increase in price is 15 percent and the value of the price elasticity of demand is - 3, then quantity demanded

A) will increase by 45 percent. B) will increase by 5 percent.

C) will decrease by 45 percent. D) will decrease by 5 percent.

Q4. If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand? Use the midpoint formula.

A) 0.17 B) 0.62 C) 1.62 D) 5

Q.5 Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: hot beverages, coffee and Peets' Coffee.

A) hot beverages, coffee, Peets' Coffee

B) Peets' Coffee, coffee, hot beverages

C) coffee, Peets' Coffee, hot beverages

D) coffee, hot beverages, Peets' Coffee

Q.6. Income elasticity measures

A) how a good's quantity demanded responds to change in the goods price.

B) how a good's quantity demanded responds to change in the price of another good.

C) how a good's quantity demanded responds to change in buyers' incomes.

D) how a good's quantity demanded responds to producers' incomes.

Q.7 Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his household income was $30,000. This year, his household income fell to $20,000 and Sefton purchased 80 pounds of potatoes. All else constant, Sefton's income elasticity of demand for potatoes is

A) negative, so Sefton considers potatoes to be an inferior good.

B) positive, so Sefton considers potatoes to be an inferior good.

C) positive, so Sefton considers potatoes to be a normal good and a necessity.

D) negative, so Sefton considers potatoes to be a normal good.

Recall this information from the text: “Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. Price floors prevent a price from falling below a certain level. When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result. Price floors and price ceilings often lead to unintended consequences.”

In a 1-2 page paper, analyze what happens when a higher minimum wage is enacted (raising a price floor on the price of labor). Will the number of workers hired change? Why? What might be an unintended consequence of a higher minimum wage law designed to help low-income workers? Next, analyze what happens when the price of rent is regulated so that prices are kept artificially low (a price ceiling). What will happen to the availability of apartments? Why? What might be an unintended consequence of a rent control wage law designed to help low-income renters?

?Mundell-Fleming ?Suppose that the price level relevant for money demand includes the price of imported goods, which in turn depends on the exchange rate. That is, the money market is described by where M/P =L(r,Y), P = ?Pd + (1 ? ?)Pf/ e

Here, Pd is the price of domestic goods in domestic currency and Pf is the price of foreign goods in foreign currency. Thus, Pf/e is the price of foreign goods in domestic currency. The parameter ? ? (0, 1] is the share of domestic goods in the price index P . Assume the Pd and Pf are sticky in the short-run.

(a) (2 points) Graph the LM ? curve on Y ? e plane.

(b) (2 points) What is the effect of expansionary fiscal policy under floating exchange rates in this model? How is it different from the benchmark Mundell-Fleming model discussed in class?

(c) (2 points) Suppose that political instability increases the country risk premium ? so that r = r? + ?. What is the effect on the equilibrium exchange rate and aggregate income in this model? How is it different from the benchmark Mundell-Fleming model discussed in class?

Show the difference between a single price monopolist and a price discriminating monopolist. Do monopolists usually price discriminate? Why or why not?

What’s the appropriate way to determine a takeover price? Should a freely negotiated purchase price always be used as the appropriate valuation of a target firm’s shares assuming the process was fair? Explain your answer.

In April 2015, CEO Dan Price of Gravity Payments made a shocking announcement. Price, who is also founder and co-owner of Gravity, decided to cut his own salary by 93 percent, and then to use that money—along with a big chunk of corporate profits— to ensure that every single one of his employees makes a minimum of $70,000.1

The news was certainly welcomed by Gravity’s employees. (For the lowest-paid employees, the raise to $70k meant a doubling of their salaries.) And Price was widely applauded by commentators and on social media.

Price’s move was especially noteworthy in an era in which many CEOs have been criticized for accepting astronomically high levels of pay. In a 2015 article on executive compensation, Bloomberg.com reported,2 for example, that Elon Musk, the entrepreneurial CEO of Tesla Motors Inc., earned just over $100 million in 2014. But that’s far from the high end of executive compensation: The same article noted that Nicholas Woodman, CEO of GoPro Inc., had earned a whopping $285 million that year. Criticism of CEO pay has not focused solely on the absolute amount earned, but also on the ratio of CEO pay to what those CEOs’ employees are paid. According to the Bloomberg article, “The CEOs of 350 Standard & Poor’s 500 companies made 331 times more than their employees in 2013.”

Some people defend high levels of pay for CEOs, pointing out that the highest levels of compensation are achieved through stock options, which means that CEOs do well only when the value of the company’s stock goes up, a sign that the CEO is actually doing a good job. Others, however, are skeptical. As the Bloomberg article points out, “Stock options, once believed to align executives with shareholders because they appreciate when the stock price rises, are now derided for encouraging short-term financial engineering at the expense of long- term planning.” In other words, stock options encourage CEOs to find short-term ways to boost stock prices (such as reducing costs by cutting employees), even if those moves aren’t in the long-term interests of the company and its shareholders.

Let’s turn back to Price’s decision. Different people had different reactions to the decision. Some applauded it as a move toward justice or fairness in compensation. Others thought it was a savvy business move, aimed at producing better outcomes for Gravity Payments by motivating employees and gaining free publicity for the company. Still others thought it spoke well of Price’s character; to them, Price looked like what a good CEO ought to look like, in comparison to the greedy CEOs of so many other companies.

questions:

1. Do you think Dan Price is a hero? Why or why not?

2. Are there any further facts that you would want to know before making a judg- ment about this case?

3. GravityPaymentsisprivatelyownedbyDanPriceandhisbrother.IfGravitywere a publicly traded company with thousands of shareholders, would that change your view about the ethics of his decision? If so, in what way?

4. If you were an employee at Gravity Payments, already making $70,000, how would you feel about employees who made half what you make suddenly mak- ing the same amount as you?

“I rented a car through price line via the internet. I got a great price for 10 days at 25$ a day. I reserved the car from Vernon NJ and I was scheduled to pick it up at the Ontario California airport. When I arrived to pick it up the Budget attendant said that priceline cancelled the reservation. I said no problem, I am here so reinstate it. They said sure and asked for $89 per day. I immediately called priceline who refused to do anything. I explained that I was stranded 2600 miles from home and rep kept repeating there was nothing she could do, it was budget who cancelled it- I demanded that the budget rep print the cancel order and; low and behold Budget cancelled it but it appears that it was in concert with priceline.” This is an example of: q) everyday low pricing h) dynamic pricing r) uniform delivered pricing i) loss-leader pricing s) bait and switch deceptive pricing j) price lining/pricing points t) price fixing p) cash discounts o) trade discounts l) basing-point pricing k) flexible-price policy