A food products company has recently introduced a new line of fruit pies in 6 U.S. cities.

Based on the pie's apparent success, the company is considering a nationwide launch. Before

doing so, it has decided to use data during a two-year market test to forecast future demand.

For each of the six markets, the firm has collected 8 quarters of data for a total of 48

observations. The following data was collected: quantity demanded (i.e., the number of pies

purchased), the price per pie, the competitor's average price per pie, income, and population.

The price of the company's pie and the competitor's pie is in dollars, while income is in

$ 1000 increments and population is in thousands. The adjusted R

2

for this regression was

0.93. The results of their study are contained in the following table:

Variable

Coefficient Estimate

Standard Error

Constant

-4, 516.30

4,988.20

Price

- 3, 590.60

1,209.50

Competitor's Price

4, 226.50

2,005.50

Income

777.10

182.90

Population

0.40

0.31

A. Is the coefficient estimate for the

Price

statistically significant? Use 2.0 as the critical value

of the t-statistic in parts (A)-(C). Show your work.

(3)

B. Is the coefficient estimate for the

Competitor's Price

statistically significant? Show your

work.

(3)

C. Is the coefficient estimate for

Population

statistically significant? Show your work.

(3)

D What is the interpretation of the coefficient estimate on the variable

Price

?

(4)

E. What is the interpretation of the coefficient estimate on the variable

Population

? Should you

have confidence in this interpretation? Why or why not?

(4)

F. What is the interpretation of the coefficient estimate on the variable

Income

?

(4)

G. Provide an interpretation of the adjusted R

2

in this estimation.

(3)

H. Assume that the price of the pie is $ 6.75, the price of the competitors pie is $ 7.55,

household income is $ 55,000, and the population is 225,000. Use this information to

calculate the following: (1) price elasticity of demand, (2) income elasticity of demand, and

(3) cross-price elasticity of demand.