Describe the relative impact that every variable

Assignment Help Macroeconomics

Reference no: EM1327791

The answer to Regression Model

1. Assume that the demand for bottled water is price inelastic. Are the following statements true or false? Explain.

a. When the price of bottled water decreases, the quantity sold increases.

b. The percentage change in the price of bottled water is less than the percentage change in quantity demanded.

c. Changes in the price of bottled water do not affect the number of bottled water sales.

d. Quantity demanded is non responsive to changes in price.

e. If more bottled water is sold, expenditures on bottled water will increase.

f. At this point the marginal revenue of bottled water is negative.

2. A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product:
Q = 24,750 - 4.6 P + 255A + 0.48Ppc + 0.56 Pm + 0.38 Pc
(8,688) (2.1) (296) (0.2) (0.29) (0.22)

The number in parenthesis indicates the standard errors of the parameters. The variables and their assumed values are:

Variable
Variable Name
Value
Q
Quantity
P
Price of basic model
11,550
A
Advertising expenditure (in thousands)
86
Ppc
Average price of a personal computer
6,800
Pm
Average price of a microcomputer
26,000
Pc
Average price of a leading competitor's workstation
13,200

a. Compute the elasticities for each of the variables. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies

b. Conduct a t-test for the statistical significance of each variable; state whether a one- tail test or two-tail test is required. What difference, if any, does it make to use a one-tail versus a two-tail test on the results? Discuss the results of the t-tests in light of the policy implications mentioned.

c. Suppose a manager evaluating these results suggests that interest rates and the performance of the computer (typically measured in millions of instructions per second, or MIPS) are important determinants of the demand for workstations and must therefore be included in the study. How would you respond to this suggestion? Elaborate.

Reference no: EM1327791

Questions Cloud

Discuss the strategy and structure of international business : discuss the strategy and structure of international business

The practice of corporate strategy : How has the practice of corporate strategy evolved over time?

Time value of money for retirement : How much will Ashley be able to withdraw each month during retirement? Instead of 6.00% what would Ashley's rate-of-return after retirement have to be so that she could withdraw $3,500 a month and still leave the same amount for the student lounge?

Strategy implementation of the company : Strategic Planning help - Do the strategic toolkit as it relate specifically to Strategy Implementation

Describe the relative impact that every variable : Describe the relative impact that every variable has on the demand. What implications do these results have for the firm's marketing and pricing policies.

Decribe each of the algorithms as to there stability : A sorting algorithm is stable if two data items having the equal value are not rearranged with respect to each other at any stage of the algorithm. decribe each of the algorithms as to there stability

Strategic leadership and strategic management : Why are strategic leadership and strategic management combined?

Organizational structure support competitive advantages : Will Apple be successful without Steve Jobs leadership? why? How does Virgin's organizational structure support its competitive advantages?

Factors to be considered while making hiring decision. : factors like personality, attitude towards work, and future upward mobility be considered when hiring?

User Account

All Pages