1. Regress Sales (dependent variable) linearly versus independent variables P, A, CP, I, P, T. Report your results.

2. Based on economic theory, what signs would you expect these coefficients have? Do they have the hypothesized signs? Which of the variables are statistically significant (different from zero) at the 99 percent confidence level? Explain why.

3. Now use this data to estimate the multiplicative form of this demand model (use the same dependent and independent variables). Report your results.Comparethe statistical properties of your multiplicative model with the linear model. Which fits the data better? Explain why.

4. What is your estimate of the price elasticity of demand (P), income elasticity of demand (I), and cross price elasticity of demand (CP) in the multiplicative model? Compare these elasticity estimates with the corresponding elasticities in the linear model when calculated at mean values for each variable.

5. In the multiplicative model perform a statistical test to determine whether demand is elastic, competitors price is a complement good, and if Jims Cheesesteaks are a normal good at the 95 percent confidence level.

6. Using the linear model forecast Jims Steaks sales during a year in which the price (P) is $6.60, Advertising Expenditures (A) is $29,900, Competitors Price (CP) is $6.90, Income (I) is $56,000, Population (P) is 7,300,000. Time (T) is 9. Derive a 95 percent confidence interval around this forecast.

Use the demand elasticities from your multiplicative model to analyze the impact of the following management decisions:

7. If Jims Cheesesteaks competitor lowers price by 10 percent how will this impact Jims sales (percentage change)? To offset this Jims Steaks strategically cuts price by 5 percent. Does this strategy work? Explain.

If income increases by 12 percent how will this impact Jims sales (percentage change)? In percentage terms how much can Jims Steaks increase price without lowering sales below previous levels. Explain.