# Problem Set 3.docx - 1 Consider the following...

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1)Consider the following scenario (adapted from Chapter 5 demand estimation question number 3, p.163):The maker of a leading brand of low-calorie microwavable food estimated the following demand equation for its product using data from 26 supermarkets around the country for the month of April:Q= -5,200 – 42P+ 20Px+ 5.2l+ 0.20A + 0.25(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)R2= 0.55 n= 26 F= 4.88Assume the following values for the independent variables:Q= Quantity sold per monthP(in cents) = Price of the product = 500Px(in cents) = Price of leading competitor’s product = 600I(in dollars) = Per capita income of the standard metropolitan statistical area (SMSA) in which the supermarket is located = 5,500A(in dollars) = Monthly advertising expenditure = 10,000M= Number of microwave ovens sold in the SMSA in which the supermarket is located = 5,000a)Calculate the quantity using the given values for the independent variables.M
b) Calculate the total revenue at this quantity.
c)What proportion of the variation in sales is explained by the independent variables?
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