Estimating the equation for consumption
Macroeconomics
Starting with the estimated demand function for Chevrolets, assume that the average value of the independent variables changes to N=225 million, I=$12,000. PF=$10,000, PG=100 cents, A=$250,000, and PI=0 (i.e., the incentives are phased out)
(a) Find the equation of the new demand curve for Chevrolets.
(b) Plot this new D’C, and on the same graph, plot the demand curve for Chevrolets, DC
(c) What is the relationship between DC and D’C? What explains this relationship?
