d. If P increases by 4%, what would happen (in percentage terms) to quantity demanded? e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded? L.ro/ ack

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 5E
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Bob'd Underground, limited liability corporation
specializing in new rap artists (B.U.LLC,rap) has
the following demand function:
= a + bp + CM +dR
where is the quantity demanded of the most
popular product B.U. sells, P is the price of that
product, M is income, and R is the price of a
related product. The regression results are:
Adjusted R
Square
Independent
Variables
Intercept
P
M
R
0.7711
Coefficients
-25.995
-4.582
0.0063
3.09
Standard
Error
69.306
1.463
0.002
1.219
t Stat P-value
-0.375 0.71008
-3.133 0.00369
3.948 0.00040
2.531 0.01648
Transcribed Image Text:Bob'd Underground, limited liability corporation specializing in new rap artists (B.U.LLC,rap) has the following demand function: = a + bp + CM +dR where is the quantity demanded of the most popular product B.U. sells, P is the price of that product, M is income, and R is the price of a related product. The regression results are: Adjusted R Square Independent Variables Intercept P M R 0.7711 Coefficients -25.995 -4.582 0.0063 3.09 Standard Error 69.306 1.463 0.002 1.219 t Stat P-value -0.375 0.71008 -3.133 0.00369 3.948 0.00040 2.531 0.01648
a. Discuss whether you think these regression
results will generate good sales estimates for
B.U. LLC, rap. Now assume that the income is
$35,000, the price of the related good is $17,
and B.U. chooses to set the price of its product
at $15.
b. What is the estimated number of units sold
given the data above? (round to nearest unit; no
decimals)
c. What are the values for the own-price,
income, and cross-price elasticities?
d. If P increases by 4%, what would happen (in
percentage terms) to quantity demanded?
e. If M increases by 3%, what would happen (in
percentage terms) to quantity demanded?
f. If R decreases by 5%, what would happen (in
percentage terms) to quantity demanded?
Transcribed Image Text:a. Discuss whether you think these regression results will generate good sales estimates for B.U. LLC, rap. Now assume that the income is $35,000, the price of the related good is $17, and B.U. chooses to set the price of its product at $15. b. What is the estimated number of units sold given the data above? (round to nearest unit; no decimals) c. What are the values for the own-price, income, and cross-price elasticities? d. If P increases by 4%, what would happen (in percentage terms) to quantity demanded? e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded? f. If R decreases by 5%, what would happen (in percentage terms) to quantity demanded?
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