Functional Equation and Regression Analysis

The following is the demand function of a traditional design of swimwear (Q - in units of swimwear) for Dolphin Enterprises, a relatively new producer of swimwear.Demand for swimwear (Q) has the following functional relationship:

Q = f(Ps, Pc, I, T)

where:Ps is the price of the swimwear

Pc is the price of the competitor's swimwear

I is the disposable income level for consumers

T is an index of the tastes and preferences for the 15 to 18 year old market.

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A.Construct a linear demand equation for the above relationship.Please include the following terms in your model:

b_i is the parameter value of the independent variable, where i = 1, 2, 3, 4;

and u is the error term.Be sure to include a constant parameter term (b₀) in the equation.

B.Create the null and alternative hypothesis for the price of swimwear (P_S) variable in your demand equation (in part 1).What type of statistical test would you use to test the significance of one of the demand function parameters?

C. If the estimated coefficient for competitor's swimwear (b₂) in your regression equation was equal to (+100.6) and it found to be statistically significant at the 95% level, how would you interpret the impact of competitors' price increase on the demand of your company's swimwear to your boss?