Reference no: EM131091405
The maker of a leading brand of low-calorie microwavable food estimated the following demand equation for its product using data from 26 supermarkets around the country for the month of April:
Q = -5,200 – 42P + 20Px + 5.2l + 0.20A + 0.25M
(2.002) (17.5) (6.2) (2.5) (0.09) (0.21) R2 = 0.55 n = 26 F = 4.88
Assume the following values for the independent variables:
Q = Quantity sold per month
P (in cents) = Price of the product = 500
Px (in cents) = Price of leading competitor’s product = 600
I (in dollars) = Per capita income of the standard metropolitan statistical area (SMSA) in which the supermarket is located = 5,500
A (in dollars) = Monthly advertising expenditure = 10,000
M = Number of microwave ovens sold in the SMSA in which the supermarket is located = 5,000
1. Calculate the price elasticity of demand
2. Compute the income elasticity
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: The maker of a leading brand of low-calorie microwavable food estimated the following demand equation for its product using data from 26 supermarkets around the country for the month of April: Calculate the price elasticity of demand. Compute the inc..
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