Author Question: The estimated price elasticities of demand for the products listed in the table as Product A are ... (Read 101 times)

schs14 · **on:** Jun 29, 2018

The estimated price elasticities of demand for the products listed in the table as Product A are from Table 6-2 in the text.

Indicate whether the products listed as Product B will have a more elastic or less elastic demand than the corresponding Product A.

Product A Estimated Elasticity for Product A Product B Is Estimated Elasticity for Product B More Elastic or Less Elastic than for Product A?
Beer -0.29 Samuel Adams Boston Lager
Chicken -0.37 Organically raised chicken
Cocaine -0.28 Illegal narcotics
Cigarettes -0.25 Marlboro Lights
Restaurant meals -0.67 Denny's Grand Slam breakfast

Question 2

Many basketball players and fans believe in the hot hand. That is, they believe that a player is more likely to make a shot if that player has made several shots in a row.

What does the hot hand hypothesis have to do with the idea of independent events? How might you test the hot hand hypothesis?

voltaire123 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Product A Estimated Elasticity for Product A Product B Is Estimated Elasticity for Product B More Elastic or Less Elastic than for Product A?
Beer -0.29 Samuel Adams Boston Lager More elastic
Chicken -0.37 Organically raised chicken More elastic
Cocaine -0.28 Illegal narcotics Less elastic
Cigarettes -0.25 Marlboro Lights More elastic
Restaurant meals -0.67 Denny's Grand Slam breakfast More elastic

Answer to Question 2

If you believe in the hot hand, then you believe that shooting a basketball several times are not independent events. And so you might, for example, believe that the probability of making a shot is higher if the player has made several shots in a row (the player is hot) than if the player had missed the last several shots. This is a testable hypothesis. You could gather data on shooting from games that have been played or by running an experiment to see if the probability a player makes a shot is independent of whether or not she made her last shot. The available evidence does not lend much support to the hot hand hypothesis.
See Thomas Gilovich, Robert Vallone, and Amos Tversky, The Hot Hand in Basketball: On the Misperception of Random Sequences, Cognitive Psychology, 1985 (http://psych.cornell.edu/sites/default/files/Gilo.Vallone.Tversky.pdf)