Compute the elasticities for each variable on this basis

Question

One of the leading HDTV manufacturers has estimated the following demand equation:

Q = + 3,000 - 60P + 120A + 50 - 50+ 80 I

(2400)   (18.2) (44)  (24)   (28)      (44)

R^2  = 0.82           F = 32.26

The variables and their assumed values are

Q = Quantity

P = Price of basic model = 500

A =Advertising expenditures = 50

 =Average price of the competitor's product = 600

= competitor's advertising expenditures = 30

I = per capita income = 75

a. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies?

b.    What would be the effect of a 6 unit increase in the competitor's advertising expenditures?

1. What would be the change in your advertising expenditures to offset your competitor's strategy?

d. Conduct a t-test for the statistical significance of each variable. Discuss the results of the t-tests in light of the policy implications mentioned