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# Economics - demand estimation

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Homework help - Economics

Company Inc, sells TV satellite dishes and has been in business for number of years. The firm's owner has become concerned about the firm's pricing, advertising, and other competitive strategies. He hired a consulting firm to estimate that demand function for TV dishes. The consulting firm informs him that the demand function was estimated using data gathered from 150 similar firms operating during the past year. Standard deviation for each of the regression coefficients are reported in parenthesis. The regression equation is given by:

(240) (.17) (4.5) (.007) (.002)

* R2 = .25
* Standard error of the estimate = 310.0

Qx = the annual quantity of dishes sold
= the price per dish
= the price of regular cable TV service
= average income

Current values for the independent variables are
= 1,000
= 80
Y = 65,000
= 50,000

a) In order to get the expected quantity of dishes for the current values of the independent variables, we simply plug those values in the equation:

b) The 95% confidence interval for the estimate found in a) is given by

This means that the real quantity of dishes sold belongs to the interval (5392.4, 6607.6) with probability 0.95.

C) Calculate and interpret the economic meaning of the point demand elasticity corresponding to the each of the models independent variables. Px, Pc, Y, Ax

https://brainmass.com/economics/elasticity/economics-demand-estimation-78113

#### Solution Preview

Homework help - Economics

Company Inc, sells TV satellite dishes and has been in business for number of years. The firm's owner has become concerned about the firm's pricing, advertising, and other competitive strategies. He hired a consulting firm to estimate that demand function for TV dishes. The consulting firm informs him that the demand function was estimated using data gathered from 150 similar firms operating during the past year. Standard deviation for each of the regression coefficients are reported in parenthesis. The regression equation is given by:

(240) (.17) (4.5) (.007) (.002)

* R2 = .25
* Standard error of the estimate = 310.0

Qx = the annual quantity of dishes sold
= the price per dish
= the price of regular cable TV service
= average income