--%>
Assignment Help - homework help

Demad elacticty

demand function is: QY = -8,000 - 5,000PY + 192A + 120I + 2,000PX (6,000) (1,000) (120) (80) (800) R2 = 91% 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. A. How would you characterize the ability of this empirical demand function to explain demand for product Y? B. Currently, PY is $8, advertising is $25,000, disposable income per capita is $50,000 and PX is $7. What are expected sales of Y in this period? C. What is the demand curve currently facing Real Kool for Product Y? (Note: Be careful to properly account for the units in which advertising and income appear in the estimated demand function.) D. What is the point price elasticity of demand for Y at the current price? E. Given the current price elasticity of demand, would a price reduction increase Real Kool profits? Explain. F. What demand curve would Real Kool face for Product Y if it raised advertising expenditures to $37,500?

   Related Questions in Managerial Economics

  • Q : Substitution Effect within Supply of

    When wage rates rise above $25 per hour in this figure given below, in that case the: (1) worker works more diligently to ensure that she keeps her job. (2) employer pays an excessively high efficiency wage. (3) income effect exceeds the substitution

    		•
  • Q : What are the important areas of

    What are the important areas of decision-making?

    		•
  • Q : Explain the external economies of scale

    Explain the external economies of scale.

    		•
  • Q : Value of the Marginal Product The value

    The value of marginal product of a variable resource is marginal physical product of it multiplied with: (w) the marginal revenue from the sale of its addition to output. (x) its cost. (y) the price of the product. (z) one.

  • Q : Total Explain the meaning of total,

    Explain the meaning of total, average, marginal and incremental revenue.

    		•
  • Q : Offsets the amount of revenue to added

    Profit maximizing firms will adjust their employment of labor till the last employee hired adds: (w) more to the firm’s revenue than this adds to cost. (x) more to the firm’s cost than this adds to the firm’s revenue. (y) an amount o

    		•
  • Q : Diminishing returns imply economic

    This is not true that the law of diminishing returns which it: (i) Consists applications in numerous areas outside economics. (ii) Is encountered in many ways in economics. (iii) Implies that continually increasing production ultimately entails increa

    		•
  • Q : Substantial general training to certain

    When a firm gives substantial general training to specific workers: (i) it is probable to pay them a premium wage to cut labor turnover. (ii) the workers are likely to receive less pay than their VMPs after such training. (iii) the workers are most pr

    		•
  • Q : Introduction of the term Margin of

    Provide a brief introduction of the term Margin of Safety?

    		•
  • Q : Decreases in derived demands Decreases

    Decreases in derived demands are best demonstrated while: (1) illegal aliens reduce equilibrium wage rates for unskilled workers. (2) swim suit sales plummet at the ends of summer vacations. (3) undocumented construction workers begin leaving the Unit

    		•