# Class 5-20100 - Managerial Economics Class 5 Thursday,...

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1 THE UNIVERSITY OF BRITISH COLUMBIA 1. Assignment 2. Illustration of Using Excel to Do a Regression Using a Chart 3. Consumer Choice 4. Utility and Marginal Utility 5. The Budget Line 6. Maximizing Utility 7. Promotions 8. Summary and Conclusion Managerial Economics Class 5 –Thursday, Sept. 23 THE UNIVERSITY OF BRITISH COLUMBIA 1. Assignment 1. Assignment 1 is being posted on the Vista website for this course today (September 23). It is worth 5% of the term mark. The assignment is due in two weeks at the beginning of class: October 7. There is a 25% penalty if you are late but less than one day late. After that you will not get credit for the assignment. 2. Read the instructions carefully. There are five questions. Assignments must be done on a computer. It is okay to do complex algebra and diagrams by hand if necessary. Show your working. You may discuss questions with other students but you must do the final write-up yourself.

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2 THE UNIVERSITY OF BRITISH COLUMBIA 2. Using Excel for Regression We have some data showing the relationship between quantity demanded and income, holding price fixed. Income Quantity 852 2951 985 3423 1074 3630 1205 3928 1450 4899 1534 4761 1712 5996 1890 6353 This data might show the quantity of organic milk (in litres) per thousand customers in each of 8 different grocery stores. The income is the average weekly per capita income in the neighbourhood where the store is located. THE UNIVERSITY OF BRITISH COLUMBIA Linear Regression using the Chart Option in Excel The coefficients in the equation are rounded off.
3 THE UNIVERSITY OF BRITISH COLUMBIA Clicker Question 1 Suppose that the effect of income, I, on purchases of organic milk is as shown in the previous slide: Q = 74 + 3.3I. Suppose that income is 1000. a. The income elasticity of demand is positive but less than one. b. An increase in price will cause the quantity-income curve to shift down. c. The R 2 statistic indicates that the linear specification explains most of the variation in quantity. d. a and b. e. all of the above . THE UNIVERSITY OF BRITISH COLUMBIA 3. Consumer Choice In analyzing consumer choice we make three assumptions about preferences over consumption bundles: i) Completeness (Any two consumption bundles can be compared.) ii) Transitivity (If a is preferred to b and b is preferred to c, then a must be preferred to c. Also if a consumer is indifferent between a and b and

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## This note was uploaded on 01/19/2011 for the course COMMERCE 290 taught by Professor Brianogram during the Spring '09 term at The University of British Columbia.

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Class 5-20100 - Managerial Economics Class 5 Thursday,...

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