Reference no: EM133063110
Your company, which specializes in porcine hygiene products (HogWash®), has the following demand function:
Q = a + bP + cM + dR
where Q is the quantity demanded of HogWash's most popular soap for pigs, P is the price of that product, M is consumer income, and R is the price of a related product. The regression results are:
|
Adjusted R Square
|
0.8300
|
|
|
|
|
Independent Variables
|
Coefficients
|
Standard Error
|
t Stat
|
P-value
|
|
Intercept
|
10,622.29
|
67.06
|
158.40
|
6.73E-48
|
|
P
|
-9.741
|
2.157
|
-4.516
|
0.000
|
|
M
|
-0.0053
|
0.001
|
-3.862
|
0.001
|
|
R
|
2.15
|
0.959
|
2.238
|
0.032
|
Discuss whether you think these regression results will generate good sales estimates for HogWash.
Now assume that the income is $58,717, the price of the related good is $9.35, and HogWash chooses to set the price of its product at $12.75.
b. What is the estimated number of units sold given the data above? (round to nearest unit; no decimals)
c. What are the values for the own-price, income, and cross-price elasticities?
d. If P increases by 5%, what would happen (in percentage terms) to quantity demanded?
e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded?
f. If R decreases by 4%, what would happen (in percentage terms) to quantity demanded?