The Kingston Company hires a consultant to estimate the demand function for its product. Using regression analysis, the consultant estimates the demand function to be
log Q = 2.01 - 0.148 log P + 0.258 log Z
where Q is the quantity demanded (in tons) of Kingston's product, P is the price (in dollars per ton) of Kingston's product, and Z is the price (in dollars per ton) of a rival product.
a. Calculate the price elasticity of demand for Kingston's product.
b. Calculate the cross elasticity of demand between Kingston's product and the rival product.
c. According to the consultant, 2 = 0.98 and the standard error of estimate is 0.001. If the number of observations is 94, comment on the goodness of fit of the regression.