The demand function for bicycles in Super City has been estimated to be: Q = 2,000 -
Question:
The demand function for bicycles in Super City has been estimated to be: Q = 2,000 - 5.5P + 15I Below is additional information concerning this Regression: Standard Error (SE) of the Intercept coefficient = 350 Standard Error (SE) of the price coefficient = 0.32 Standard Error (SE) of the Income coefficient = 0.70, R-Square = 0.64, Adjusted R-Square = 0.61, F-Statistic = 31.402, Q is quantity demanded per year, P is the price in dollars, and I is annual income in thousands of dollars.
A. Which of the two independent variables (if any) appears to be statistically significant (at the 5% level) in explaining bicycle sales?
B. What proportion of the variation in bicycle sales is explained by the regression equation?
C. When P = $150 and I = 15 (use 15 in the estimation and NOT 15,000 since income is already measured in thousands), calculate the Income elasticity of demand and characterize whether the product is normal or inferior.
Managerial economics applications strategy and tactics
ISBN: 978-1439079232
12th Edition
Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris