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2. General Cereals (Malaysia) 5dn Bhd is using a regression model to estimate the demand of Tweeties Sweeties for children. The following demand function is
2. General Cereals (Malaysia) 5dn Bhd is using a regression model to estimate the demand of Tweeties Sweeties for children. The following demand function is being used; Q1 = 50 -4P1 - 3P2 + 2P3 + 0.001Y. Additional information given: At P, = RM5, P2 = RM7, PJ= RM3 and Y= RM11,000, Q. = 26 units. Where; Q1 = quantity demand of Tweeties Sweeties per box in units Pi = Price of Tweeties Sweeties per box, in RM Pa = Price of Corn Cereal per box, in RM P) = Price of Mixed Cereal per box, in RM Y = Disposable income per household, in RM a. Use cross elasticities to determine the relationship between Tweeties Sweeties and the other two goods. (6) b. Calculate the income elasticity of demand for Tweeties Sweeties. (2) c. Determine the effect on Q when there is 10 percent increase in price for Com Cereal and Mixed Cereal individually. (2)
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