Use the estimated demand function to calculate the expected value of QY in a typical market. Calculate the 95% confidence interval within which you would expect to find actual values of sales. Calculate the point price elasticity of demand, advertising point elasticity, and cross-price point elasticity.
Wharton Econometric
QY = 26,950 − 450P + 220PX + 0.08A + 0.01I
(11,000) (150) (180) (0.3) (0.05)
R2 = 0.95
Standard Error of the Estimate = 10
Here, QY is market demand for Product Y, P is the price of Y in dollars, A is dollars of advertising expenditures, PX is the average price in dollars of another (unidentified) product, and I is dollars of household income. In a typical market, the price of Y is $100, PX is $70, advertising expenditures are $50,000, and average family income is $60,000.
- Use the estimated demand function to calculate the expected value of QY in a typical market.
- Calculate the 95% confidence interval within which you would expect to find actual values of sales.
- Calculate the point
price elasticity of demand , advertising point elasticity, and cross-price point elasticity. - Would a reduction in price result in an increase in total revenues? Why? or Why not?
5. Which variables in this regression model are statistically significant at the 95 percent confidence level? Show your work.
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- Would a reduction in
price result in an increase in total revenues? Why? or Why not? - Which variables in this regression model are statistically significant at the 95 percent confidence level? Show your work.
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