Reference no: EM133066841
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:
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Adjusted R Square
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0.8300
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Independent Variables
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Coefficients
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Standard Error
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t Stat
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P-value
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Intercept
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10,622.29
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67.06
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158.40
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6.73E-48
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P
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-9.741
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2.157
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-4.516
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0.000
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M
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-0.0053
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0.001
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-3.862
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0.001
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R
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2.15
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0.959
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2.238
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0.032
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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?
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