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Stonebuilt Concrete produces a specialty cement used in construction of roads. Stonebuilt is a price-setting firm and estimates the demand for its cement by the state department of transportation using a demand function in the nonlinear form: Q=a po mop de where Q=yards of cement demanded monthly, P= the price of Stonebuilt's cement per yard, M= state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Stonebuilt transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below: DEPENDENT VARIABLE:LNQ | R-SQUARE P-VALUE ON F OBSERVATIONS: 64 0.8093 84.872 0.0001 PARAMETER ESTIMATE STANDARD ERROR VARIABLE T-RATIO P-VALUE INTERCEPT LNP LNM LNPR 8.20 -3.54 0.64287 0.7854 4.01 1.64 0.19 0.38 2.04 -2.16 3.38 2.07 0.0461 0.0357 0.0014 0.0439 If tax revenue per capita (M) increases 10%, the estimated quantity of cement demanded will X increase by less than 1%. increase more than 1% but less than 5%. → O increase more than 5% but less than 10%. increase more than 10%.

Answer 1

Coefficient of LnM=0.64287

A 1% Increase in tax revenue will increase demand by 0.64287%

A 10% increase in tax revenue will increase demand by 6.4287%

ans is C