Mama Olivia catering services has determined that demand for “pizza” by university students’ is given by the hypothetical equation below: Q=B0+B1PX+B2A+B3PY+B4Y+B5P0p+u Where Q
Question 3
Mama Olivia catering services has determined that demand for “pizza” by university students’
is given by the hypothetical equation below:
Q=B0+B1PX+B2A+B3PY+B4Y+B5P0p+u
Where Q is the quantity of pizza sold per month, Px is the price of pizza, A is the amount of cedis spent on advertisement, PY is the price of Mama Olivia’s major competitor, Y is disposable income per capita, Pop is population of university students and u is the residual (error term). The estimated regression output is presented below. (table attached as image).
Use the table above to answer the following questions:
(a). Form the linear demand
(b). Describe the economic meaning of each coefficient included in Mama Olivia’s demand
function
c). Describe the statistical significance of each of the independent variables
(d). Interpret the coefficient of determination (R2)
(e). Use the regression model to estimate sales if PX is GH¢6, A is GH¢250, PY is GH¢7, Y is GH¢500 and Pop is 2,400
![Where Q is the quantity of pizza sold per month, Px is the price of pizza, A is the amount of
cedis spent on advertisement, PY is the price of Mama Olivia's major competitor, Y is
disposable income per capita, Pop is population of university students and u is the residual
(error term). The estimated regression output is presented below.
Variables
Coefficients
Standard
t Stat
P-
Error
value
Intercept
280.27
37.48
7.48
0.00
Price (Px)
- 3.15
1.57
-2.01
0.004
Competitor Price (Py)
68.11
0.04
-2.79
0.061
Income (Y)
0.98
0.76
-1.30
0.012
Advertising
Expenditure
5.11
3.79
-1.35
0.19
(A)
Population (Pop)
23.01
5.20
-4.42
0.002
R? = 0.85](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8179a17-758b-47d3-a488-473d96ad32e9%2F9741fd2c-aa4c-46d4-b4e2-2a691cc67ddd%2F638qp1s_processed.jpeg&w=3840&q=75)
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