QUESTION TWOIvy, a General Manager at Mumias Sugar Company, estimated a multiplicative demandfunction of the form: Qd = aPapIªiPoª• _using a cross-section data collected in thecompany sales on 30th June, 2016. The estimation results are as follows:ConstantPrice (P) Income (I) Price of Other Good (P0)Estimated coefficient0.022-0.2231.3540.133Standard Error0.0120.0560.5020.814t-statistic(1.19)(-3.98)-2.69-0.13Number of Observations, n = 210; R-squared = 0.7516Critical Students' t = 1.96 at 5% Level of Significancea) How would the coefficients and R² value be interpreted?b) What will the quantity demanded be if the values of the independent variables are:Price = 20; Income per capita = Ksh 500; and the Price of the Other Good = Ksh 30?

(i) The intercept value is 0.022, which means that if P, I and P0 are zero each, minimum sales will…

Answered: Ivy, a General Manager at Mumias Sugar…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You estimated a regression with the following output. Source | SS df MS Number of obs = 268 -------------+---------------------------------- F(1, 266) = 23.48 Model | 668419.175 1 668419.175 Prob > F = 0.0000 Residual | 7572666.51 266 28468.6711 R-squared = 0.0811 -------------+---------------------------------- Adj R-squared = 0.0777 Total | 8241085.68 267 30865.4895 Root MSE = 168.73 ------------------------------------------------------------------------------ Y | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- X | 1.014128 .2092916 4.85 0.000 .6020489 1.426207 _cons | 9.173163 21.13463 0.43 0.665 -32.43929 50.78561…
Other Companies (Part 2) You directed your research department to do some research on the demand for Tesla sedans. They selected BMW i3 Sedans and Chevy Bolts as comparative offerings. Using regression analysis, the research department comes up the following estimate for yearly demand. Qx = -40,000 -1*Px +0.02*M +2*PB +2*PC Where: Px = $70,000, M = $150,000, PB = $65,000, PC = $40,000 a. Is the own price elasticity of demand for Tesla sedans at the point defined above elastic or inelastic? If Mr. Musk decides to raise his prices, what will happen to his revenue. b. PB and PC represent the price for i3 sedans and Bolt sedans respectively. Are these items compliments or substitutes when compared to Teslas? Give evidence to support your answer. c. Is the demand for Tesla sedans elastic or inelastic to price changes of BMW i3 and Bolt at the price points given in the problem? Interpret the result you find and explain what it means.
QUESTION 3 (Figure: US Business Cycle Expansions and Contractions) From the data on averages for all cycles we can conclude that over time: Business cycles data.pdf O The number of cycles during 1945-2020 exceeded the number of cycles during 1854-1919. The number of cycles during 1919-1945 exceeded the number of cycles during 1945-2020. The average duration of contractions during 1854-1919 was shorter than the average duration of contractions during 1945-2020. The average duration of expansions during 1854-1919 was shorter than the average duration of expansions during 1945-2020.
An estimate of the demand function for household furniture produced the following results: F = 0.0036 Y¹.08 R0.16 p(-0.48) where F = furniture expenditures per household Y = disposable personal income per household R = value of private residential construction per household P = ratio of the furniture price index to the consumer price index The point price elasticity for household furniture is r² = 0.996 and the income elasticity is According to the estimated model, a 10 percent increase in the value of private residential construction per household demanded by percent. the quantity
The Physics Club sells E = mc2 T-shirts at the local flea market. Unfortunately, the club's previous administration has been losing money for years, so you decide to do an analysis of the sales. A quadratic regression based on old sales data reveals the following demand equation for the T-shirts. q = −2p2 + 30p (9 ≤ p ≤ 15) Here, p is the price the club charges per T-shirt, and q is the number it can sell each day at the flea market. (a) Obtain a formula for the price elasticity of demand for E = mc2 T-shirts. E = (b) Compute the elasticity of demand if the price is set at $9 per shirt. (Round your answer to two decimal places.) Interpret the result. The demand for E = mc2 T-shirts is going down by about ____% per 1% increase in the price. (c) How much should the Physics Club charge for the T-shirts to obtain the maximum daily revenue? $ What will the revenue be? $
(a) Interpret the elasticity of cigarette consumption with respect to prices. (b) Does this regression model return the expected sign for this relationship? Explain. (c) Is the independent variable's coefficient statistically significant at a = 0.05? Explain. (d) As you have noticed, both the dependent and independent variables are defined in logs. Does this fact violate the linearity portion of CLRM Assumption I? Explain your answer. (e) A Shapiro-Wilk test on this model's residuals returns a p-value of 0.5329. Given this fact, is CLRM Assumption VII satisfied? Explain.

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