# Question: 1 a simple linear demand function may be stated as...

###### Question details

**1. A simple linear demand function may be stated as Q =
a - bP + cI where Q is quantity**

**demanded, P is the product price, and I is consumer
income. To compute an appropriate value for c, we can use observed
values for Q and I and then set the estimated income elasticity of
demand equal to:**

**A) c(I/Q)**

**B) c(Q/I)**

**C) -b(I/Q)**

**D) Q/(cI)**

**2. Suppose that, at the market clearing price of natural
gas, the price elasticity of demand is -1.2 and the price
elasticity of supply is 0.6. What will result from a price ceiling
that is 10 percent below the market clearing price?**

**A) A shortage equal to 1.8 percent of the market
clearing quantity**

**B) A shortage equal to 0.6 percent of the market
clearing quantity**

**C) A shortage equal to 18 percent of the market clearing
quantity**

**D) A shortage equal to 6 percent of the market clearing
quantity**

**E) More information is needed.**

**3. Other things being equal, the increase in rents that
occurs after rent controls are abolished is smaller
when**

**A) the own price elasticity of demand for rental homes
is price inelastic.**

**B) the own price elasticity of demand for rental homes
is price elastic.**

**C) the own price elasticity of demand for rental homes
has unitary price elasticity.**

**D) rented homes and owned homes are
complements.**

**E) rented homes and owned homes are
substitutes.**