Q. 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 - 2.80P +150A + 0.3Ppc + 0.35Pm + 0.2Pc
(5,234) (1.29) (175) (0.12) (0.17) (0.13) Standard errors of the coefficients?
R² = 0.68 SEE = 786 F = 21.25
The variables and their assuming values are:
Q= Quantity
P= Price of basic model = 7,000
A = Advertising expenditures (in thousands) = 52
Ppc = Average price of a personal computer = 4,000
Pm= Average price of a minicomputer = 15,000
Pc= Average price of a leading competitor's workstation = 8,000
a.) Compute the elasticity's for each variable. On the basis, discuss the relative impact that each variable has on demand. Discuss what suggestion do these results have for the firm's marketing and pricing policies?
b.) Conduct a t-test for the statistical significance of every variable. In every case, discuss whether a one-tail or two-tail test is needed. Illustrate difference, if any, does it make to use a one-tail verse a two-tail test on the results? Discuss the results of the t-tests in light of the policy implications mentioned.
c.) Suppose a manager evaluating these results suggests that interest rates and the performance of the computer (typically measured in millions of directions for every second, or IPS) are important determinants of the demand for workstations and must therefore be included in the study. How would you respond to this implication? Explain.