4. Bob's Underground, a limited liability corporation specializing in new rap artists (B.U. LLC, rap) has...
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4. Bob's Underground, a limited liability corporation specializing in new rap artists (B.U. LLC, rap) has the following demand function: Q=a+bP+cM+dP where Q is the quantity demanded of the most popular product B.U. sells, P is the price of that product, M is income, and PR is the price of a related product. The regression results are: 0.8222 Coefficients Standard Error t Stat -32.32 65.77 -0.491 -2.46 1.38 -1.813 0.008 0.001 6.045 PR -2.56 1.26 -2.025 a. Discuss whether you think these regression results will generate good sales estimates for B.U. LLC, rap. Adjusted R Square Independent Variables Intercept P M P-value 0.626 0.079 9.53E-07 0.051 Now assume that the income is $35,000, the price of the related good is $24, and B.U. chooses to set the price of its product at $21. b. What is the estimated number of units sold given the data above? c. What are the values for the own-price, income, and cross-price elasticities? d. If P increases by 4%, what would happen (in percentage terms) to quantity demanded? e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded? f. If PR decreases by 5%, what would happen (in percentage terms) to quantity demanded? 4. Bob's Underground, a limited liability corporation specializing in new rap artists (B.U. LLC, rap) has the following demand function: Q=a+bP+cM+dP where Q is the quantity demanded of the most popular product B.U. sells, P is the price of that product, M is income, and PR is the price of a related product. The regression results are: 0.8222 Coefficients Standard Error t Stat -32.32 65.77 -0.491 -2.46 1.38 -1.813 0.008 0.001 6.045 PR -2.56 1.26 -2.025 a. Discuss whether you think these regression results will generate good sales estimates for B.U. LLC, rap. Adjusted R Square Independent Variables Intercept P M P-value 0.626 0.079 9.53E-07 0.051 Now assume that the income is $35,000, the price of the related good is $24, and B.U. chooses to set the price of its product at $21. b. What is the estimated number of units sold given the data above? c. What are the values for the own-price, income, and cross-price elasticities? d. If P increases by 4%, what would happen (in percentage terms) to quantity demanded? e. If M increases by 3%, what would happen (in percentage terms) to quantity demanded? f. If PR decreases by 5%, what would happen (in percentage terms) to quantity demanded?
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a Yes the above regression results will provide a good estimate for BU LLC Because all of the ... View the full answer
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