Purchase Solution

# The MacWend Drive-In

Not what you're looking for?

2. The MacWend Drive-In has determined that demand for hamburgers is given by the following equation:

Q = 205.2 + 23.0A - 200.0PM + 100.0PC + 0.5I
(1.85) (2.64) (-5.61) (2.02) (4.25)

where Q is the number of hamburgers sold per month (in 1,000s), A is the advertising expenditures during the previous month (in \$1,000), PM is the price of MacWend burgers (dollars), PC is the price of hamburgers of the company's major competitor (dollars), and I is income per capita in the surrounding community (in \$1,000). The t-statistics for each coefficient is shown in parentheses below each coefficient.
A. How would you interpret the value for each independent variable's coefficient estimate?
B. Are the signs of the individual coefficients consistent with predictions from economic theory? Explain.
C. If A = \$5,000, PM = \$1, PC = \$1.20, and I = \$20,000, how many hamburgers will be demanded?
D. What is the advertising elasticity at A = \$5,000?

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.