Question: A recent study estimates the demand for over-the-counter (OTC) cough and cold medicines to be: Log Q = 0.885 - 0.744log(P) - 0.50log(INC) + 0.253log(ADV)

A recent study estimates the demand for over-the-counter (OTC) cough and cold medicines to be: Log Q = 0.885 - 0.744log(P) - 0.50log(INC) + 0.253log(ADV) -0.30log(PHYSP) (5.52) (4.92) (1.40) (6.64) (0.99).

Adj. R^2=0.30

N=243

where:

Q = Annual dosages demanded of cough and cold medicines

P = Price per dosage of cough and cold medicines

INC = Average income of buyers

ADV = Advertising expenditures on cough and cold medicines

PHSP = Market price of a physician visit

Notes:

The t-statistics shown in parentheses below the estimated coefficient.

All variables expressed in logarithms so the coefficient estimates can be interpreted as elasticities.

a. Show graphically the qualitative impact that you hypothesize each independent variable has on the demand for OTC cough and cold medicines (i.e. Draw demand for OTC cough and cold medicines and illustrate your hypothesis about the direction of the effect of each independent variable on demand.)

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