The ATV Company produces a specialty cement used in the construction of roads. ATV is a price-setting firm and estimates the demand for its cement using a demand function in the linear form: Q = f (P, M, PR) where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of ATV obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below: DEPENDENT VARIABLE Qc R- SQUARE F-RATIO P-VALUE ON F OBSERVATIONS 64 0.8093 84.872 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 8.20 4.01 2.04 0.0461 PC -3.54 1.64 -2.16 0.0357 M 0.64287 0.19 3.38 0.0014 PA 0.7854 0.38 2.07 0.0439 1. If the price of cement per yard increases by 10, what will happen to the estimated quantity of cement demanded? What happens if it will increase by 20%? 2. If tax revenue per capita (M) increases by 10, what will happen to the estimated quantity of cement demanded? 3. Write the resulting regression equation.
The ATV Company produces a specialty cement used in the construction of roads. ATV is a
Q = f (P, M, PR)
where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. The manager of ATV obtained the following results in her attempt to estimate the demand for cement in the succeeding months. The results are presented below:
|
DEPENDENT VARIABLE |
Qc |
R- SQUARE |
F-RATIO |
P-VALUE ON F |
|
|
OBSERVATIONS |
64 |
0.8093 |
84.872 |
0.0001 |
|
|
VARIABLE |
PARAMETER ESTIMATE |
STANDARD ERROR |
T-RATIO |
P-VALUE |
|
|
INTERCEPT |
|
8.20 |
4.01 |
2.04 |
0.0461 |
|
PC |
-3.54 |
1.64 |
-2.16 |
0.0357 |
|
|
M |
|
0.64287 |
0.19 |
3.38 |
0.0014 |
|
PA |
0.7854 |
0.38 |
2.07 |
0.0439 |
1. If the price of cement per yard increases by 10, what will happen to the estimated quantity of cement demanded? What happens if it will increase by 20%?
2. If tax revenue per capita (M) increases by 10, what will happen to the estimated quantity of cement demanded?
3. Write the resulting regression equation.
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