Economic
Autor: Pn Nurul Sah • November 18, 2016 • Term Paper • 2,099 Words (9 Pages) • 566 Views
a. Q = A + B.P + C.Pᵪ + D.Ad + E.I
Where, A = 807.91
B = -5.03
C = 4.86
D = 0.33
E = 0.01
Q = 807.91 – 5.03P + 4.86Pᵪ + 0.33A + 0.01I
b. 1. Price variable (P) is all other things being equal
- increase of $1.00 in product price will decreased demand by 5.03 cases.
2. Competitor’s price variable (Pᵪ), if all other things being equal
- increase in competitor’s price by $1.00 will increase company’s demand by 4.86 cases.
3. Advertising variable (A), if all other things being equal
- increase of expenditures by $1.00 in advertising will increase demand by 0.33 cases.
4. Income variable (I), if all other things being equal
- increase in customer’s income by $1.00 will increase demand by 0.01 cases.
c. . Evaluate the coefficient of determination for the regression model.
The R2 = 90.4 per cent obtained by the model means that 90.4 per cent of demand variation is explained by the underlying variation in all four independent variables. This is a relatively high level of explained variation and implies an attractive level of an explanatory power.
d. T-test
n=30 k=5
Variables | t-ratio | t-critical | Result |
P | (-11.022) ≥ | 2.060 | Cannot reject H₀ P is significant |
Pᵪ | 4.833 ≥ | 2.060 | Cannot reject H₀ P is significant |
A | 3.141 ≥ | 2.060 | Cannot reject H₀ A is significant |
I | 7.994 ≥ | 2.060 | Cannot reject H₀ I is significant |
All independent variables are significant.
e. Forecast demand for 5 markets
Regression model: Q=807.91 – 5.034P + 4.86Pᵪ + 0.33A + 0.01I
Market A
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