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Your company, which specializes in running shoes for men who are growing increasingly follicly-challenged (BalderDash), has the following demand function: Q = a + bP

Your company, which specializes in running shoes for men who are growing increasingly follicly-challenged (BalderDash), has the following demand function:

Q = a + bP + cM + dR

where Q is the quantity demanded of BalderDash's most popular shoes, 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 0.8757
Independent Variables Coefficients Standard Error t Stat P-value
Intercept 48653.31 2162.58 22.50 3.52E-21
P -48.567 19.361 -2.509 0.017
M 0.0515 0.012 4.370 0.000
R -25.63 8.485 -3.021 0.005
  1. Discuss whether you think these regression results will generate good sales estimates for BalderDash.

Now assume that the income is $65,500, the price of the related good is $38.50, and BalderDash chooses to set the price of its product at $85.00.

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 6%, what would happen (in percentage terms) to quantity demanded?

e. If M increases by 2%, what would happen (in percentage terms) to quantity demanded?

f. If R decreases by 3%, what would happen (in percentage terms) to quantity demanded?

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