In your work for the craft brewer, you’ve also estimated a linear demand functio
ID: 3043647 • Letter: I
Question
In your work for the craft brewer, you’ve also estimated a linear demand function. The following is a simplified version of your regression results for the linear demand function:
In your work for the craft brewer, you've also estimated a linear demand function. The following is a simplified version of your regression results for the linear demand function: Q = 200-2600P + 1.70A + 1.50 where, once again, Q is quantity demanded (measured in number of 4-packs sold per month), P is price (measured in S/4-packs), A is advertising expenditure, and Y is disposable income per household. Consider a liquor store where: P = $10.00 A- S30,000 Y = $30,000 a. Use these regression results to calculate the projected level of 4-pack demand for this liquor store i.e., the projected level of Q. (Show your calculations.) Using your answer to part (a) and other information given above, calculate the point price elasticity of demand for 4-packs at this liquor store. (Show your calculations.) b. c. Using your answer to part (a) and other information given above, calculate the point income nfir tore. (Sho your aleulations)Explanation / Answer
a)Q= 200-2600*10+1.7*30000+1.5*30000 = 70200
b) Point price elasticity =dQ/dP*P/Q = -2600* (10/70200)=-0.37037
c) Income point elasticily = dQ/dI * I/q = 1.5*30000/70200= 0.64102