18. As the owner of Barney’s Broilers—a fast-food chain—you see an increase in the demand for broiled chicken as consumers become more health conscious and reduce their consumption of beef and fried foods. As a result, you believe it is necessary to purchase another oven to meet the increased demand. To finance the oven you go to the bank seeking a loan. The loan officer tells you that your revenues of $750,000 are insufficient to support additional debt. To qualify for the loan, Barney’s Broilers’s revenue would need to be $50,000 higher. In developing a strategy to generate the additional revenue, you collect data on the price (in cents) per pound you charge customers and the related quantity of chicken consumed per year in pounds. This information is contained in the file called Q18.xls available online at www.mhhe.com/baye7e. Use these data and a log-linear demand specification to obtain least squares estimates of the demand for broiled chicken. Write an equation that summarizes the demand for broiled chicken, and then determine the percentage price increase or decrease that is needed in order to boost revenues by $50,000.

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A 1 SUMMARY OUTPUT 2 3 Regression Statistics 4 Multiple R B C D E F G 0.76 5 R-Square 0.57 6 Adjusted R-Square 0.49 7 Standard Error 47.13 25 8 Observations 9 10 Analysis of Variance 11 12 Regression 13 Residual 14 Total 15 Degrees of Freedom Sum of Squares Mean Square F 4 60936.56 15234.14 6.86 Significance F .03 20 44431.27 2221.56 24 105367.84 16 Coefficients Standard Error t-Statistic P-Value Lower 95% Upper 95% 17 Intercept 136.96 43.46 3.15 0.01 50.60 223.32 18 Price of Residential Heating Fuel -91.69 29.09 -3.15 0.01 -149.49 -33.89 19 Price of Natural Gas 43.88 9.17 4.79 0.00 25.66 62.10 20 Price of Electricity -11.92 8.35 -1.43 0.17 -28.51 4.67 21 Income -0.050 0.3500 -0.14 0.90 -0.75 0.65