ScholarMatic: Explanation & Answer
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You work as a market analyst for your company. You estimated using the regression method the demand function of
the company’s product and you obtained the following.
Q = 8,400 – 10 P + 5 A + 4 Px + 0.05 M,
Where:
Q = Quantity demanded
P = Price = 1,000
A = Advertising expenditures, in thousands = 40
PX = price of competitor’s good = 800
M = average monthly consumer income = 4,000
a. Calculate the elasticity for each variable and briefly comment on what information this gives you in each case.
b. Is the company maximizing its revenue. If not, what is the profit maximizing price.
a ) Q = 8400 – 10 p + 54 + 4 Px +0,05M= 8400 – 10. 1000 + 5. 40 + 4.800 +0,05. 4200 = 2000ep =29 1 – -10. 10003600- OP Q2000402A Q2000epx2Q Px – 4. 8002 Px Q2000=46em2Q MQ-= 0of….
ScholarMatic: Explanation & Answer
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