Estimating Demand and Its Elasticities
Determining the meaning, relevance, and importance to interpret the regression results of the demand model for any company is to first determine the direct and indirect factors affecting the demand. Factors imbedded in the price of a product include the cost of labor and capital. The higher the price the lower the demand will be. Other factors such as household data on median income, age group, price of the substitute goods, price of the complementary goods, and the numbers of potential consumers in the market. The demand model will determine the quantity demanded of any product based on the dependent and independent variables included that directly affect the impact of change in quantity. If you want to connect the demand estimation with a company of your choice, what are some of the items you focus on? What supports your decision to focus on these items?