Reference no: EM131074771

Question 1. Suppose That GM's Smith estimated the following regression equation for Chevrolet automobiles:

Q_c= 100,000 - 100P_c + 2,000N + 50I + 30P_F - 1,000P_G + 3A + 40,000P_I

Where:

Q_c = quantity demanded per year of Chevrolet automobiles

P_c = price of Chevrolet automobiles, in dollars

N  = population of the U. S., in millions

I  =   per capita disposable income, in dollars

P_F =  price of Ford automobiles, in dollars

P_G  = real price of gasoline, in cents per gallon

A = advertising expenditures by Chevrolet, in dollars per year

P_I=  credit incentives to purchase Chevrolet, in percentage points below the rate of interest on borrowing in the absence of incentives

Question 2

Starting with the estimated demand function for Chevrolets given in Problem 2, assume that the average value of the independent variable changes to:

N = 225 million

I = $12,000

P_F  = $10,000

P_G  = 100 cents

A = $250,000

P_I = 0

(i.e.  the incentives are phased out)

Find the equation for the new demand curve for Chevrolets. Substitute the given value of independent variables into the equation in problem 2. Show the new equation as:

Q_c= a - 100P_c, a is a number.

For N, enter 225 not 225,000,000

Find the value of Q_c  if P_c is $10,000