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October 1, 2014

October 1, 2014

Posted by **Greg** on Sunday, February 19, 2012 at 11:10pm.

Dependent Variable: Q

Observations: 20

R-Square: 0.8435

F-Ratio: 28.75

P-Value on F: 0.001

Variable

Intercept-Parameter Estimate 425120, Standard Error 220300, T-Ratio 1.93, P-Value 0.0716

P- Parameter Estimate -37260.6, Standard Error 12587, T-Ratio -22.96, P-Value 0.0093

M- Parameter Estimate 1.49, Standard Error 0.3651, T-Ratio 4.08, P-Value 0.0009

PR- Parameter Estimate -1456, Standard Error 460.75, T-Ratio -3.16, P-Value 0.006

a. Discuss the statistical significance of the parameter estimates a ˆ , , , and using the p- values. Are the signs of , and consistent with the theory of demand? Wilpen plans to charge a wholesale price of $ 1.65 per can. The average price of a tennis racket is $ 110, and consumers’ average household income is $ 24,600.

b. What is the estimated number of cans of tennis balls demanded?

c. At the values of P, M, and PR given, what are the estimated values of the price ( ), income ( M), and cross- price elasticities ( XR) of demand?

d. What will happen, in percentage terms, to the number of cans of tennis balls demanded if the price of tennis balls decreases 15 percent?

e. What will happen, in percentage terms, to the number of cans of tennis balls demanded if average household income increases by 20 percent?

f. What will happen, in percentage terms, to the number of cans of tennis balls demanded if the average price of tennis rackets increases 25 percent?

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