What would we expect to happen to quantity demanded

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Reference no: EM13163065

You decide to estimate the following quarterly sales forecasting model for new boat sales in your local county:

Qt = a + bt + cD

The equation is estimated using quarterly data on new boat sales in the county from the 3rd quarter of 2001 to the 4th quarter of 2007 (t = 1,...,26). The variable D is a dummy variable for the second quarter, which is the "season" for selling new boats: D = 1 in the second quarter, and 0 otherwise. The results of the estimation are:

Dependent Variable

LNQ

R-SQUARE

F-RATIO

P-VALUE ON F

 

OBSERVATIONS

64

0.8464

110.25

0.0001

 

 

 

PARAMETER

STANDARD

 

 

VARIABLE

 

ESTIMATE

ERROR

T-RATIO

P-VALUE

INTERCEPT

 

5.65

3.20

1.77

0.0825

LNP

 

-1.02

0.59

-1.73

0.0890

LNM

 

0.45

0.22

2.05

0.0452

LNPR

 

-2.0

0.75

-2.67

0.0098

a. Express the estimated demand equation in logarithms.

b. Is X a normal or an inferior good? And how are goods X and R related? Explain.

c. Which of the parameter estimates are statistically significant at the 5 percent level?

d. Estimate the own-price elasticity for good X, the cross-price elasticity for goods X and R, and the income elasticity for good X.

e. Holding all other things constant, if household income were to fall by 22%, what would we expect to happen to quantity demanded? Explain.

f. Holding all other things constant, if own price were to increase by 22%, what would we expect to happen to quantity demanded? Explain.

g. Holding all other things constant, if the price of R were to fall by 8%, what would we expect to happen to quantity demanded? Explain.

Reference no: EM13163065

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