Question

Q1 .A manufacturer of computer workstations gathered average monthly sales figures from its 56 Branch offices and dealerships across the country and estimated the following demand for its product :

Q = +15,000-2.8 P+150A+0.3Ppc+0.35Pm +0.2Pc

(4,234) (1.29) (175) (0.12) (0.17) (0.13)

R^2 = 0.R F= 21.25 R^2 = 0.68   

The variables and their assumed values are

Q= QUANTITY

P = PRICE OF BASIC MODEL = $7,000

A = ADVERTISING EXPENDITURES (IN THOUSANDS ) =$52000

Ppc = Avg price of a personal computer =$4,000

Pm = Avg price of a minicomputer = $15,000

Pc = Avg price of a leading competitor's workstation =$ 8,000

(   ) th   

( ................................( ) the number in brackets is the standard error of estimation SEE

....................................The t-test is = coefficient of variable/SEE

The t-test

1. Compute the elasticity of each variable.
2. What would happen to Quantity if price (P) increased by $500
3. What would happen to Quantity if average price of personal computer decreases by $1000.
4. Conduct a t-test for the statistical significance of each variable. Which ones are significant at 5% level of significance.
5. What does the value of R^2 mean for this test.

Answer 1

Given:

Q = +15,000-2.8 P+150A+0.3Ppc+0.35Pm +0.2Pc

(4,234) (1.29) (175) (0.12) (0.17) (0.13)

R^2 = 0.R F= 21.25 R^2 = 0.68   

The variables and their assumed values are

Q= QUANTITY

P = PRICE OF BASIC MODEL = $7,000

A = ADVERTISING EXPENDITURES (IN THOUSANDS ) =$52000

Ppc = Avg price of a personal computer =$4,000

Pm = Avg price of a minicomputer = $15,000

Pc = Avg price of a leading competitor's workstation =$ 8,000