Discuss the below:
Review Case : Justifying An Increased Line of Credit
1. A monthly regression analysis is to be conducted using monthly data for each demand variable. Formulate your empirical model using the additive functional form.
2. Using economic theory, what are the hypothesized signs of the parameters in the demand model. Explain.
3. Using the results from your regression analysis, interpret your estimated parameters. Are they statistically significant? Compare yout hypothesized parameter signs with your estimated signs. If there are discrepancies, provide an appropriate,Texplanation.
4. Using average values for the most recent 6-month period, what are your estimated elasticities with respect to each independent variable (excluding the time trend variable). Interpret each elasticity.
5. As stated, your banker wants empirical evidence supporting your contention that current sales volume can be maintained with lower prices thanAhose of your pricipal competitors and relatively little advertising (recall, your recent relative advertising effort has fallen compared to its average for the 3-year period). Also, your banker is concerned about the impact on your volume of a likely 5 percent decline in department store suit prices. Using appropriate parameter and elasticity estimates from your demand model, address your banker's concerns.
6. Your Singapore-based supplier can ship you between 10 and 15 thousand suits per month at a per unit cost of $54.50. Does your most recent 6-month average price represent an optimal pricing stategy? Explain.
For case scenario review the below attachment:
Attachment:- Justifying An Increased Line of Credit.rar