Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 4, Problem 2E
(a)
To determine
To estimate: the demand function using the linear regression model.
(b)
To determine
The coefficient of determination. Significance of the price variable by performing t-test.
(c)
To determine
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An economist believes that price, x, (in dollars) is the biggest factor affecting quantity
sold, y. To support his argument, he collected data on price and quantity sold from a
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The regression equation is reported as
y =
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Your company just became international by offering its products in both the United States and Canada. Experts in your analytics
department believe that tastes for your product differ in those two countries, and have carefully collected data on prices and quantity
demanded in both countries. They then present you with the results of two regressions, one for each country, as follows:
Log Price regressed on Log Quantity (United States):
Standard
Coefficients
Error
t Stat
P-value
Lower 95%
Upper 95 %
1.67605E-
Intercept
52.75573994 10.81051303
4.88040363
31.48708283
74.0239705
06
| Log Quantity
-5.382266173 1.170584108 -4.597932039 6.15253E-06 -7.685279168 -3.079253177
Log Price regressed on Log Quantity (Canada):
Standard
Error
Coefficients
22.8707593 10.64507785
-2.095788278 | 1.152727409 -1.818112644 0.069981782
t Stat
2.148482109
Upper 95%
43.8139384
P-value
Lower 95%
Intercept
Log Quantity
0.032425603
1.9275802
-4.363669916
0.17209336
Assume you have adequate statistical significance…
The Pilot Pen Company has decided to use 15 test markets to examine the sensitivity of demand for its new product to various prices, as shown in the following table. Advertising effort was identical in each market. Each market had approximately the same level of business activity and population.
Complete the following worksheet and then estimate the demand function for Pilot's new pen using a linear regression model.
Test Market
Price Charged
Quantity Sold
(cents)
(Thousands of Pens)
ii
xixi
yiyi
xixiyiyi
xi2xi2
yi2yi2
1
50
20
1,000
2,500
400
2
50
21
1,050
2,500
441
3
55
19
1,045
3,025
361
4
55
19.5
1,072.5
3,025
380.25
5
60
20.5
1,230
3,600
420.25
6
60
19
1,140
3,600
361
7
65
15.5
1,007.5
4,225
240.25
8
65
15
975
4,225
225
9
70
14.5
1,015
4,900
210.25
10
70
15.5
1,085
4,900
240.25
11
80
13
1,040
6,400
169
12
80
14
1,120
6,400
196
13
90
11.5
1,035
8,100
132.25
14
90
11
990
8,100
121
15
40
17
680
1,600
289
Total
980
246
?…
Chapter 4 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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