Complete the following questions on demand function: 1. Write the demand equation resulting from your output. Include specific coefficients. 2. Calculate the price elasticity of demand for this manufacturer if the price is $9.25 per unit, consumer income is $21,000, advertising is $100,000, and the quantity demanded is $499,999. Is demand elastic or inelastic at this price and quantity? 3. Calculate income elasticity of demand for this manufacturer at the same point as identified in question 2. Is the product an inferior good, a normal good, or a luxury? Must use run regression for #1..excel data is attached:
Total cost = sum of all costs of doing business
Q sold = the quantity sold (in units) that quarter
Q prod = the quantity produced (in units) that quarter
Q dem = the quantity demanded (in units) that quarter
Price = price per unit charged by the firm
Labor = # labor hours used in production in that quarter. For purposes of this assignment, assume that all labor hours are identical.
Capital Investment = the number of plants in operation that quarter. Assume for the sake of this project, that all plants are approximately equal in size and use of technology.
Advertising Expenses = dollars spent on advertising that quarter
Capital Consumer Advertising
TC Qsold Qprod Qdem Price Labor Invest Income Expenses
Qtr 1 $4,415,000 499,999 499,999 549,425 $9.25 50,000 5 $20,000 $150,000
Qtr 2 $5,186,644 587,236 587,236 714,993 $9.25 60,000 5 $20,600 $150,000
Qtr 3 $5,174,189 548,667 647,480 548,667 $9.75 70,000 5 $21,000 $125,000
Qtr 4 $7,282,201 766,297 667,484 833,521 $9.65 75,000 5 $21,200 $200,000
Qtr 5 $7,630,401 811,784 811,764 860,747 $9.90 85,000 6 $21,400 $200,000
Qtr 6 $6,971,144 697,396 828,822 697,396 $10.25 95,000 6 $22,000 $150,000
Qtr 7 $7,915,228 715,182 829,046 829,046 $11.50 100,000 6 $21,600 $325,000
Qtr 8 $6,901,834 764,199 769,903 769,903 $10.00 75,000 6 $21,600 $150,000
Qtr 9 $7,719,569 811,784 811,784 811,784 $10.05 85,000 6 $21,600 $225,000
Qtr 10 $4,011,162 425,280 656,281 656,281 $10.75 60,000 6 $21,200 $125,000
Qtr 11 $8,688,700 744,619 829,046 829,046 $11.76 100,000 6 $22,000 $400,000
Qtr 12 $8,780,822 673,009 1,106,471 1,103,171 $12.35 140,000 8 $22,000 $400,000