June Ward, controller for NAFTA, Inc., has asked you to analyze demand in 30 regional markets for Beaver's Cleavers, a new brush cutting device, dubbed Product Y. A statistical analysis of demand in these markets shows (standard errors in parentheses):

Qy = 2,000 - 25Py + 10Px + 0.025I

(1,500) (8) (4) (0.011)

R2 = 0.80

F =34.7

Standard Error of the Estimate = 40

Here, Qy is market demand for Product Y, P is the price of Y in dollars, A is dollars of advertising expenditures, Px is the average price in dollars of another (unidentified) product, and I is dollars of household income. In a typical market, the price of Y is $100, Px is $50, and disposable income per family averages $80,000.

1. Using =.05 significance level, perform a t-test for the price (of Y) variable. You must clearly state the null and alternative hypotheses and explain the conclusion of your test.
2. State the null and alternative hypotheses and perform the F-test. What is the conclusion of the F- test?
3. Compute the predicted value of Q for a typical market and construct a 95% confidence interval about the predicted value.
4. Calculate the elasticity of Q with respect to price. What can you conclude based upon this elasticity?
5. Derive the demand and marginal revenue curves.