Thomas Magnum, a financial analyst for Detroit Wheels, Inc., has been hired to analyze demand

in 20 regional markets for Product Y, a major item. A statistical analysis of demand in these

markets shows (standard errors in parentheses) :

Qy =26,950-400P+220Px+0.06A+0.01I

(11,000) (160) (180) (0.4) (0.05)

R2 -0.95

Standard Error of the Estimate = 1 0

Here, Qv is market demand for Product Y, P is the price of Y in dollars, A is dollars of

advertising expenditures, Px is the average price in dollars of another (unidentified)

product, and I is dollars of household income. In a typical market, the price of Y is S loo,

Px is $75, advertising expenditures are $50,000, and average family income is $80,000.

A. Use the estimated demand function to calculate the expected value ofQy in a

typical market.

8. Calculate the 95% confidence interval within which you would expect to find

actual values of sales.

C. Calculate the point price elasticity of demand, advertising point elasticity, and

cross-price point elasticity.

D. Would a reduction in price result in an increase in total revenues? Why? or why

not?

E, Which variables in this regression model are statistically significant at the 95

percent level? Show your work.