. Suppose your marketing research department estimates the demand for your company’s product as Qx= 500-11Px+0.5Y, where Qx is the quantity demanded per week, Px is the price of product X, and Y is the average household income per week in the city. R2=0.87, the standard error of the coefficients of the price (Px) and household weekly income (Y) are 2 and 0.1, respectively. a. Are the coefficients of Px and Y statistically significant? b. Given the initial values Px=$10 and Y=$1000, find price elasticity (Ep) and income elasticity(EY), respectively. Is the demand for the company’s product price and income elastic, or inelastic?
. Suppose your marketing research department estimates the demand for your company’s product as Qx= 500-11Px+0.5Y, where Qx is the quantity demanded per week, Px is the price of product X, and Y is the average household income per week in the city. R2=0.87, the standard error of the coefficients of the price (Px) and household weekly income (Y) are 2 and 0.1, respectively. a. Are the coefficients of Px and Y statistically significant? b. Given the initial values Px=$10 and Y=$1000, find price elasticity (Ep) and income elasticity(EY), respectively. Is the demand for the company’s product price and income elastic, or inelastic?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter4: Estimating Demand
Section: Chapter Questions
Problem 7E
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2. Suppose your marketing research department estimates the demand for your company’s product as Qx= 500-11Px+0.5Y, where Qx is the quantity demanded per week, Px is the price of product X, and Y is the average household income per week in the city. R2=0.87, the standard error of the coefficients of the price (Px) and household weekly income (Y) are 2 and 0.1, respectively.
a. Are the coefficients of Px and Y statistically significant?
b. Given the initial values Px=$10 and Y=$1000, find price elasticity (Ep) and income elasticity(EY), respectively. Is the demand for the company’s product price and income elastic, or inelastic?
c. What action should the manager take to increase
the company’s operating revenue?
d. Is the company’s product a normal good? How do you know?
e. Interpret what R2=0.87 means
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