The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm:Q = a + bP + cM + dPRwhere Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below: DEPENDENT VARIABLE:QR-SQUAREF-RATIOP-VALUE ON FOBSERVATIONS:320.798436.140.0001VARIABLE PARAMETER ESTIMATESTANDARD ERRORT-RATIOP-VALUEINTERCEPT 846.300076.700011.030.0001P –8.60002.6000–3.310.0026M 0.01840.00483.830.0007PR –4.30751.2300–3.500.0016 Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30. At the prices and income given above, what is the income elasticity?

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Answered: Q = a + bP + cM + dPR where Q is the…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

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The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm:

Q = a + bP + cM + dP_R

where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and P_R is the price of a related product. The results of the estimation are presented below:

DEPENDENT VARIABLE:	Q	R-SQUARE	F-RATIO	P-VALUE ON F
OBSERVATIONS:	32	0.7984	36.14	0.0001
VARIABLE		PARAMETER ESTIMATE	STANDARD ERROR	T-RATIO	P-VALUE
INTERCEPT		846.3000	76.7000	11.03	0.0001
P		–8.6000	2.6000	–3.31	0.0026
M		0.0184	0.0048	3.83	0.0007
PR		–4.3075	1.2300	–3.50	0.0016

Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30. At the prices and income given above, what is the income elasticity?

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