Suppose you are the district manager of a firm and intends to reduce the total demand for
Question:
Suppose you are the district manager of a firm and intends to reduce the total demand for residential heating fuel. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented as follows. Based on this information, answer the following questions?
a. What is the value of the Coefficient of determination, and interpret it?
b. Comment on the overall fitness of the regression line.
c. Estimate the demand function for residential heating fuel.
d. Which factor is significant? Why?
e. If price of Residential Heating Fuel is raised by AED100, what would happen to the quantity demand for residential heating fuel?
f. Calculate own price elasticity of demand at the average values of Quantity demand for heating fuel = 400, Price of Residential Heating Fuel = 100, Price of Natural Gas = 10, Price of Electricity = 10 and Income = 1000? Is demand elastic or not? Why?
g. If Price of Residential Heating Fuel is raised, what would happen to total revenue?
Taxes and Business Strategy A Planning Approach
ISBN: 9780132752671
5th edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon