Q2 - Homework #6, Question 2 Suppose that all US consumers...

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Homework #6, Question 2 Suppose that all US consumers have roughly the same tastes for frozen apple pies. Consequently, we imagine that the demands for frozen apple pies in any two major US cities are likely to be described by the same function. Let that function have the form: Q d = a + b · P + c · Y + d · Pop + ε where Q d is the quantity of frozen apple pies demanded in a given month (measured in thousands of pies); P is the price of a frozen apple pie (measured in $); Y is median household income in the local market (measured in thousands of $); is the population (measured in hundreds of thousands); and ε is a random term that captures noise and unpredictability in consumers’ decisions. During Jan., 2008, the following information is collected from Fve cities around the US: Albuquerque –Population: 500,000 Median household income: $40,000 Price of frozen apple pies: $2.75 Quantity of frozen apple pies purchased: 11,500 Boston - Population: 575,000 Median household income: $38,000 Price of frozen apple pies: $4.00
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Q2 - Homework #6, Question 2 Suppose that all US consumers...

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