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Your company, which specializes in porcine hygiene products (HogWash), has the following demand function: Q = a + bP + cM + dR where Q

Your company, which specializes in porcine hygiene products (HogWash), has the following demand function:

Q = a + bP + cM + dR

where Q is the quantity demanded of HogWash's most popular soap for pigs, P is the price of that product, M is consumer income, and R is the price of a related product. The regression results are:

Adjusted R Square 0.8300
Independent Variables Coefficients Standard Error t Stat P-value
Intercept 10,622.29 67.06 158.40 6.73E-48
P -9.741 2.157 -4.516 0.000
M -0.0053 0.001 -3.862 0.001
R 2.15 0.959 2.238 0.032
  1. Discuss whether you think these regression results will generate good sales estimates for HogWash.

Now assume that the income is $58,717, the price of the related good is $9.35, and HogWash chooses to set the price of its product at $12.75.

b. What is the estimated number of units sold given the data above? (round to nearest unit; no decimals)

c. What are the values for the own-price, income, and cross-price elasticities?

d. If P increases by 5%, what would happen (in percentage terms) to quantity demanded?

e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded?

f. If R decreases by 4%, what would happen (in percentage terms) to quantity demanded?

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