Q=- 5200 - 42P + 20PX + 5.2I + .20A + .25M

R-square = 0. 55n = 26

Assume the following values for the independent variables:

Q = Quantity sold per month;P (in cents) = Price of the product = 500; Px (in cents) = Price of leading competitior's product = 600; I (in dollars) = Per capita income of the standard metropolitan statistical area in which the supermarket is located = 5,500; A (in dollars) Monthly advertising expenditure = 10,000; M = Number of microwave ovens sold in the SMSA in which the supermarket is located = 5,000.

Show and explain each question in detail including the formulas with the correct numbers substituted for the variables.

a.Compute the own-price elasticity of demand.

b.How concerned do you think this company would be about the impact of a recession on its sales?Explain.

c.Do you think that this firm should cut its price to increase its market share?Explain.

d.What proportion of the variation in sales is explained by the independent variables in the equation?How confident are you about this answer?Explain.