Calculate the elasticity for each variable at that point, Ask an Expert

Economics

The following question refers to this regression equation. (Standard errors in parentheses)

Qd= 15 - 10 P + 1.5 Adv + 0.4 Px + 2 I

(5.23) (2.29) (0.525) (1.75) (1.5)

R^2 = 0.65

N = 120

F = 35.25

Standard error of Y estimate = 0.565

Qd = Quantity demanded

Consider the case when:

P = Price = 7

Adv = Advertising expense = 54

Px = price of competitor's good = 8

I = average monthly income = 4

a. Calculate the elasticity for each variable at that point and briefly comment on what information this gives you for each variable.

b. Should this firm be concerned if macroeconomic forecasters predict a recession? Explain your answer.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9444351

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