Question

1. One-Tail t-tests. Martin's Footwear, Inc., of Boston, Massachusetts has retained you to aid the firm in an evaluation of its marketing strategy. Martin's "Happy Feet" running shoes are marketed through local retail outlets in the eastern United States. A move to extend Martin's market to Midwestern and western states is currently being contemplated.

A marketing research group conducted an empirical analysis of demand for Martin's "Happy Feet" during 2008 in thirty-six regional markets and found the following (standard errors in parentheses):

	Q	= -518 - 10P + 12.5I + 5W - 0.5CA + 5A
		(240)   (1.3)    (8.6)   (2.8)     (0.4)    (2.5)
	R2	= 85%

Standard error of the estimate = 200

cov(I,W)

= 3.5, cov(I,CA) = 8.6, cov(I,A) = 2.8

where Q = quantity sold (in pairs of shoes), P = price (in dollars), I = disposable income in relevant market (in millions of dollars), W = weather measured by average temperature (in degrees), CA = competitor advertising (in thousands of dollars), A = Martin's "own" advertising (in thousands of dollars).

A.     Will a recession hurt sales?

B.	Is demand more dependent on local income than on weather condition?

Answer 1

A) recession means Low confidence in an economy usually reduces inflation expectation. Fallingasset prices. In a recession, the price of houses and other assets tends to falldue to lower demand. This leads to lower wealth and therefore, less spending.

Since here the model is

Q	= -518 - 10P + 12.5I + 5W - 0.5CA + 5A

By the model we can say if the price of shoes increase 1 $ then quantity sales would be decreases 10 units .

Since the declining in the prices of shoes ,quantity sold should be effected.

B)-

Q	= -518 - 10P + 12.5I + 5W - 0.5CA + 5A

In accordance with the model if there is increased in 1$ income then quantity sale shoes will increase 12.5 unit.

While

If average weather temperature increased by 1 degree then the quantity sales of shoes increased by 5 pairs.

Since Demand more dependent upon local income.