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Estimating the expected demand and the confidence interval.

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

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M919583

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