The Mini Company manufactures and sells educational toys. An empirical demand function for one of the firm's products has been estimated over the last 21 quarters using regression analysis.

The estimated demand function is: QY = -8,000 - 5,000PY + 192A + 300I + 2,000PX

(6,000) (1,000) (120) (200) (800)

R2 = 91%

Standard Error of the Estimate = 1,000

Here QY is quantity (measured in units) of Product Y demanded in the current period, A is hundreds of dollars of advertising ($00), I is thousands of dollars of disposable income per capita ($000), and PX is the price ($) of another toy manufactured by a competitor, RXZ Toys. The terms in parentheses are the standard errors of the coefficients.

Questions:

A. How would you characterize the ability of this empirical demand function to explain demand for product Y?

B. Currently, PY is $8, advertising is $25,000, disposable income per capita is $20,000 and PX is $7. What are expected sales of Y in this period, and what range of sales would you specify for the current period if you wanted to establish a 99% confidence interval?

C. What is the demand curve currently facing Mini company for Product Y? (Note: Be careful to properly account for the units in which advertising and income appear in the estimated demand function.)