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New Demand Curve for Chevrolet

Starting with the estimated demand function for Chevrolet given in problem 2, assume that the average value of the independent variables changes to N=225 million, I= 12,000, PF=10,000, Pg=100 cents, A=250,000, and p1=0 (ie. The incentives are phased out).

3(a). Find the equation of the new demand curve for Chevrolets.
3(b). Plot the new demand curve, D1 c' and, on the same graph, plot the curve for Chevrolets, D c'. found in 2 (d).

Using Managerial Economics in a Global Economy, Dominick Salvatore, 7th Edition.

Solution Preview

See the attachment for the graphs and formatted Solution.

(a) The equation for the new demand curve for Chevrolets, we substitute the new average values of the independent or explanatory variables,

QC = 100,000 - 100PC + 2,000N + 50I + 30PF - 1,000PG + 3A + 40,000PI
QC = 100,000 - 100PC + 2,000(225) + 50(12,000) + 30(10,000) - 1,000(100) + 3(250,000) +

Solution Summary

This is a problem on estimating the demand function for Chevrolet, plot the new demand curve and plot the curve of Chevrolet.