Expected demand and confidence interval

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Reference no: EM1313213

Expected Demand Estimation, Junk foods International has hired you to analyze demand in 25 regional markets for a new Product Y, called Healthy Chips. A statistical analysis of demand in these markets shows (standard errors in parentheses):

Qy = 250 - 10P + 6Px + 0.25a + 0.04i

(100) (3) (2) (0.1) (0.15)

R squared = 90%

Standard error of the Estimate = 75

Here, Qy is market demand for Product Y, P is the price of Y in dollars. (a) is dollars of advertising expenditures, Px is the average price in dollars of another (unidentified) product, and (i) is dollars of household income. In a typical market, the price of Y is $1,500, Px is $500, advertising expenditures are $50,000 and disposable income per household is $45,000

a. Calculate the expected level of demand in a typical market.

b. Indicate the range within which actual demand is expected to fall with 95% confidence.

c. From this information, how much confidence can you put in these results? How might this information impact your demand related decision making?

Reference no: EM1313213

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