Answer only E Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for itsproduct using data from 25 retail stores around Dover city for the month of November:Q=-2000-15 Pje+ 8.4Px + 0.51 + 0.4A(220) (5.0) (5.6) (0.2)(0.16)R²=0.57 n=25F = 6.83Assume the following values for the independent variables:Standard error1Q denotes quantity sold per monthPje (denotes price of the bottled juice) = 240 (in cents)P. (denotes price of leading competitor's product) - 300 (in cents)I (denotes per capita income of the standard residential district in which the retail store is located)= 4000 (in dollars)A (denotes monthly advertising expenditure) = 7700 (in dollars)Using this information, answer the following questions:a. Compute elasticities for each variable..b. Do you think that this firm should cut its price to increase its market share? Explain. (4 points)c. Should this firm increase its advertising expenditure next month if it wants to promote its salesof juice? Explain.d. Which of the explanatory variables in the regression are statistically significant at the 0.05 level?Explain.e. What proportion of the variation in sales is explained by the independent variables in the equations?How confident are you about this answer? Explain.

R2 measures the variable in the dependent variable explained by the independent variable. The value…

Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for its product using data from 25 retail stores around Dover city for the month of November: Q-2000-15 Pje+ 8.4P + 0.51 +0.4A (220) (5.0) (5.6) (0.2) (0.16) R¹-0.57 F-6.83 Standard error n=25

Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for its product using data from 25 retail stores around Dover city for the month of November: Q-2000-15 Pje+ 8.4P + 0.51 +0.4A (220) (5.0) (5.6) (0.2) (0.16) R¹-0.57 F-6.83 Standard error n=25

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Answer only E

Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for its
product using data from 25 retail stores around Dover city for the month of November:
Q=-2000-15 Pje+ 8.4Px + 0.51 + 0.4A
(220) (5.0) (5.6) (0.2)
(0.16)
R²=0.57 n=25
F = 6.83
Assume the following values for the independent variables:
Standard error
1
Q denotes quantity sold per month
Pje (denotes price of the bottled juice) = 240 (in cents)
P. (denotes price of leading competitor's product) - 300 (in cents)
I (denotes per capita income of the standard residential district in which the retail store is located)
= 4000 (in dollars)
A (denotes monthly advertising expenditure) = 7700 (in dollars)
Using this information, answer the following questions:
a. Compute elasticities for each variable..
b. Do you think that this firm should cut its price to increase its market share? Explain. (4 points)
c. Should this firm increase its advertising expenditure next month if it wants to promote its sales
of juice? Explain.
d. Which of the explanatory variables in the regression are statistically significant at the 0.05 level?
Explain.
e. What proportion of the variation in sales is explained by the independent variables in the equations?
How confident are you about this answer? Explain.

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