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Economics

You are hired to analyze demand in 25 regional markets of product Z. Regression results of demand are given below. The numbers in parenthesis are standard errors.

Qz = 250 - 10P + 6PX + 0.25A + 0.04I
(100) (3) (2) (0.1) (0.15)
R2= 90%
Standard Error of the Estimate (s) = 75

Here, Qz is market demand for Product Z, P is the price of Z 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 Z is $1,500, PX is $500, advertising expenditures are $50,000, and disposable income per household is $45,000.

a. Calculate the expected level of demand in a typical market.

b. Indicate the range within which actual demand is expected to fall with 95% confidence.

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Microeconomics, Economics

Category:- Microeconomics
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