Ambivalent Autronics has commissioned a study to quantify the determinants of the demand for its cruise-control device. This device is installed in an automobile to allow the vehicle to maintain a constant cruising speed, with subsequent fuel economy advantages.

Based on the data available to it from sources, the Demand Data Research Company has calculated the following regression equation:

where Q* is quantity demanded of the cruise-control unit per month; Px is the price per unit set by Ambivalent Autronics (in dollars); Ps is the average price (in dollars) of the three other cruise control units that are considered the closest substitutes for AA’s unit; Ax is AA’s advertising budget per month (in thousands of dollars); Y is the level of per capita disposable income per month (in thousands of dollars); and S is the level of sales of new automobiles per month. The regression analysis also provided the following statistics:

AA’s cost of production of the cruise-control units has stabilized, and it can produce for all foreseeable demand situations at a constant marginal cost of $132.50 per unit. The current values of the independent variables are Px = 189.95; Ps = 195.00; Ax = 12.65; Y — 1.53; and S = 895,645.

(d) At that price, in what range of figures do you expect quantity demanded to fall at the 95 percent confidence level?

(e) What other qualifications underlie your analysis?

Qr = 125,062.85 1,862.52 P + 1,226.94P, +524.18A, +28,672.74 Y + 0.035 S -