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 Pb Mc P dR 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:
a. The estimated demand for cement is..
i. elastic because E is 8.20
ii. elastic because É = – 3.54.
ill. elastic because € = -2.16.
iv. inelastic because Ê = -0.357.
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