I am unsure how to solve for B in the problem below.  Integrating Problem: The research department of the Corn Flakes Corporation (CFC) estimated the following regression for the demand of the cornflakes it sells: QX = 1.0 - 2.0PX + 1.5I + 0.8PY - 3.0PM + 1.0A where QX = sales of CFC cornflakes, in millions of 10-ounce boxes per year PX = the price of CFC cornflakes, in dollars per 10-ounce box I = personal disposable income, in trillions of dollars per year PY = price of competitive brand of cornflakes, in dollars per 10-ounce box PM = price of milk, in dollars per quart A = advertising expenditures of CFC cornflakes, in hundreds of thousands of dollars per year This year, PX = $2, I = $4, PY = $2.50, PM = $1, and A = $2. (a) Calculate the sales of CFC cornflakes this year. (b) Calculate the elasticity of sales with respect to each variable in the demand function. (c) Estimate the level of sales next year if CFC reduces PX by 10 percent and increases advertising by 20 percent, I rises by 5 percent, PY is reduced by 10 percent, and PM remains unchanged. (d) By how much should CFC change its advertising if it wants its sales to be 30 percent higher than this year?

Question

I am unsure how to solve for B in the problem below. 

Integrating Problem: The research department of the Corn Flakes Corporation (CFC) estimated the following regression for the demand of the cornflakes it sells:

QX = 1.0 - 2.0PX + 1.5I + 0.8PY - 3.0PM + 1.0A

where

QX = sales of CFC cornflakes, in millions of 10-ounce boxes per year

PX = the price of CFC cornflakes, in dollars per 10-ounce box

I = personal disposable income, in trillions of dollars per year

PY = price of competitive brand of cornflakes, in dollars per 10-ounce box

PM = price of milk, in dollars per quart

A = advertising expenditures of CFC cornflakes, in hundreds of thousands of dollars per year

This year, PX = $2, I = $4, PY = $2.50, PM = $1, and A = $2. (a) Calculate the sales of CFC cornflakes this year. (b) Calculate the elasticity of sales with respect to each variable in the demand function. (c) Estimate the level of sales next year if CFC reduces PX by 10 percent and increases advertising by 20 percent, I rises by 5 percent, PY is reduced by 10 percent, and PM remains unchanged. (d) By how much should CFC change its advertising if it wants its sales to be 30 percent higher than this year?

Expert Answer

Want to see the step-by-step answer?

See Answer

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

See Answer
*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: A monopolist has a demand for its product that is P = A + BQ . It has no fixed costs. Marginal cost ...

A: The given information: Demand function is represented as follows: P = A+BQ                          ...

Q: Please help

A: Production technologies or production function defines a relationship between the output and inputs....

Q: The total cost of Mr. Plow, a snow-removal business, is given in the table below. Quantity adriveway...

A: Total Profits of 5 drive ways = Total revenues of 5 driveways - Total cost of 5 drivewaysTotal reven...

Q: what strategies that would attract buyers to buy from a company web site not form Amazon?

A: Consumers:Any person who demands good and services for their personal use and not for the resale. A ...

Q: Merkel, Inc. has a monopoly in producing coconut oil.   Draw a graph to show the profit maximizati...

A: 1.Monopoly:In a monopoly market, profit maximization will occur at where the marginal revenue and ma...

Q: I need help with principles of microeconomics chapter 10 problem 6 please help

A: We have been given the price and quantity schedule as follows:

Q: A current account deficit is generally a result of:     a large amount of U.S. purchases of ...

A: Current account deficit:The current account deficit refers the measures of a country's trade where t...

Q: There are a number of theories that attempt to explain the observed facts concerning yield curves.  ...

A: A yield curve is also known as “term structures of interest rates” is line graph that plots the yiel...

Q: Suppose that the excess reserves in Bank A increase by $700. If the required reserve ratio is 25 per...

A: To understand this we need to know that this reserve requirement of 25% per cent actually shows much...