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# New Demand Curve for Chevrolet

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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.

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#### 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.

\$2.19

## Find the equation of the new demand curve for Chevrolets

Demand Analysis:

Qc=100,000 - 100 Pc + 2,000N + 50I + 30Pf - 1,000 Pg + 3A + 40,000P1
Where Qc= quantity demanded per year of Chevrolet automobiles
Pc= Price of Chev. automobiles in dollars
N= population of the USA in millions
I= per capita disposible income in dollars
Pf= price of Ford automobiles in dollars
Pg= real price of gasoline in cents per gallon
A= advertising expenditures by Chev. in dollars per year
P1= credit incentives to purchase Chevrolets, in percentage points below the rate of interest on borrowing in the absence of incentives

Assume that the average volume of the independent variables are N=225 million, I= \$12,000, Pf= \$10,000 Pg= 100 cents, A= \$250,000, and P1= 0, incentives are phased out

a. Find the equation of the new demand curve for Chevrolets?
b. If Pc= \$10,000, find the value of Qc

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