The Kalamazoo Brewing Company (KBC) currently sells its microbrews in a seven-state area: Illinois, Indiana, Michigan, Minnesota, Mississippi, Ohio, and Wisconsin. The company’s data analytics department has collected data from its distributors in each state. This data consists of the quantity of cases and price (per case) of microbrews sold in each state, as well as the average income (in thousands of dollars) of consumers living in various regions of each state. The data for each state are available in the Excel file on Brightspace--please note there are multiple tabs at the bottom of the spreadsheet, each refers to one of the seven states selling the Kalamazoo Brewing Company’s microbrews. You will use the data to estimate the linear demand function for their microbrews in Indiana. To do this, perform the regression analysis in Excel for the data provided for Indiana. a. Write out the estimated linear demand function for microbrews in Indiana as a function of the price per case (P) and average income of consumers (M). Round each estimated value to two decimal places. b. Assume that the average consumer income is M = $35. For what range of prices is the demand for KBC’s microbrews elastic in Indiana? Unitary elastic? Inelastic? c. At what price is total revenue in the Indiana market maximized if M = $35? What is the value of marginal revenue at this price? d. Are KBC’s microbrews a normal or an inferior good in Indiana? Explain briefly in a few sentenc

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Kalamazoo Brewing Company (KBC) currently sells its microbrews in a seven-state area: Illinois, Indiana,
Michigan, Minnesota, Mississippi, Ohio, and Wisconsin. The company’s data analytics department has collected
data from its distributors in each state. This data consists of the quantity of cases and price (per case) of
microbrews sold in each state, as well as the average income (in thousands of dollars) of consumers living in
various regions of each state. The data for each state are available in the Excel file on Brightspace--please note
there are multiple tabs at the bottom of the spreadsheet, each refers to one of the seven states selling the
Kalamazoo Brewing Company’s microbrews. You will use the data to estimate the linear demand function for
their microbrews in Indiana. To do this, perform the regression analysis in Excel for the data provided for
Indiana.
a. Write out the estimated linear demand function for microbrews in Indiana as a function of the price per
case (P) and average income of consumers (M). Round each estimated value to two decimal places.
b. Assume that the average consumer income is M = $35. For what range of prices is the demand for KBC’s
microbrews elastic in Indiana? Unitary elastic? Inelastic?
c. At what price is total revenue in the Indiana market maximized if M = $35? What is the value of
marginal revenue at this price?
d. Are KBC’s microbrews a normal or an inferior good in Indiana? Explain briefly in a few sentenc

Quantity
83
83
97
103
101
88
81
99
98
103
102
88
105
98
93
88
92
92
86
93
86
87
108
88
98
92
93
99
105
88
97
93
101
90
106
87
98
89
83
104
97
76
98
82
94
99
89
75
92
97
Price
30.85
31.94
30.69
32.27
32.39
30.01
30.35
30.58
30.1
27.43
27.02
30.24
28.84
29.57
31.17
32.17
32.21
29.43
34.07
29.79
35.54
30.13
26.26
33.13
30.3
27.94
32.07
30.51
27.23
33.37
29.75
29.44
28.6
30.71
32.35
32.57
31.61
30.08
34.49
27.52
30.08
34.35
28.59
34.75
29.51
30.72
35.61
36.19
30.78
32.75
Income
31.9
31.77
36.86
40.79
37.06
34.03
33.52
32.78
37.02
35.88
36.01
32.55
37.14
33.84
35.82
35.68
36.24
33.66
34.85
32.51
34.97
33.81
35.24
37
38.6
30.02
36.88
36.15
36.09
36.44
34.99
31.71
34.46
32.6
40.61
36.37
37.34
32.81
34.1
32.3
35.26
32.25
33.53
34.15
33.95
35.66
34.48
34.09
35.15
37.34

Expert Solution

Step 1

Given data:

Quantity	Price	Income
83	30.85	31.9
83	31.94	31.77
97	30.69	36.86
103	32.27	40.79
101	32.39	37.06
88	30.01	34.03
81	30.35	33.52
99	30.58	32.78
98	30.1	37.02
103	27.43	35.88
102	27.02	36.01
88	30.24	32.55
105	28.84	37.14
98	29.57	33.84
93	31.17	35.82
88	32.17	35.68
92	32.21	36.24
92	29.43	33.66
86	34.07	34.85
93	29.79	32.51
86	35.54	34.97
87	30.13	33.81
108	26.26	35.24
88	33.13	37
98	30.3	38.6
92	27.94	30.02
93	32.07	36.88
99	30.51	36.15
105	27.23	36.09
88	33.37	36.44
97	29.75	34.99
93	29.44	31.71
101	28.6	34.46
90	30.71	32.6
106	32.35	40.61
87	32.57	36.37
98	31.61	37.34
89	30.08	32.81
83	34.49	34.1
104	27.52	32.3
97	30.08	35.26
76	34.35	32.25
98	28.59	33.53
82	34.75	34.15
94	29.51	33.95
99	30.72	35.66
89	35.61	34.48
75	36.19	34.09
92	30.78	35.15
97	32.75	37.34

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