Cosmic Toys Company manufactures and sells educational toys. An empirical demand function for one of the firm’s products has been estimated over the last 21 quarters using regression analysis. The estimated demand function is:
Qy = -8,000 - 5,000 Py + 192A + 120I + 2,000 Px
(6,000) (1,000) (120) (80) (800)
R2 = 91%
Standard Error of the Estimate = 1,000
Here Qy , is quantity (measured in units) of Product Y demanded in the current period, A is hundreds of dollars of advertising ($00), I is thousands of dollars of disposable income per capita ($000), and Px is the price ($) of another toy manufactured by a competitor, ABC Toys. The terms in parentheses are the standard errors of the coefficients.