Question

Katch You (KY) has developed a new digital camera with an automatically triggered flash. This product was introduced last year and a follow-up survey has just been completed, giving rise to the following regression equation:

Qx = – 120.1366 – 83.78Px + 0.09Y – 25.45Pc + 81.39Ps + 0.1824Ax

Where Qx is the quantity demanded; Px is the price per unit in dollars; Y is the income per capita, Pc is the price per unit for the camera’s case and Ps is the price per unit (average) of other cameras; Ax is the advertising budget per month. The cost of production for each camera is $650.28 and the current price is $1,101.99. The current values for the other variables are, Y = $800,000, Pc = $99.99, Ps = $899.99 and Ax = $45,000

a) Should KY be concerned with its competitors? ( b) What is the revenue implication if there is a recession? (c) Are the products related? (d) Discuss the implications if there is a price decrease (e) If the objective is to maintain the quantity of camera demanded, what change in the price of KY’s digital camera will be necessary to compensate for a $4 increase in the price of the complement?   

Answer 1