Estimated for conlan enterprises

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The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm: Q = a + bP + cM + dPR

Where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below:

DEPENDENT VARIABLE: Q R-SQUARE F-RATIO P-VALUE ON F
OBSERVATIONS: 32 0.7984 36.14 0.0001

VARIABLE PARAMETER STANDARD
ESTIMATE ERROR T-RATIO P-VALUE
INTERCEPT 846.30 76.70 11.03 0.0001
P -8.60 2.60 -3.31 0.0026
M 0.0184 0.0048 3.83 0.0007
PR -4.3075 1.230 -3.50 0.0016


Q. Assuming that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30, determine the following:
a. The quantity of product Conlan expect to sell
b. The own-price elasticity of demand
c. The income elasticity of demand

Reference no: EM13500846

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