Answer to Question #286463 in Macroeconomics for Aster

Question

Suppose that William Berl, the manager of the Oldsmobile division of the General motors Corporation, has estimated the following regression equation for Oldsmobile

Q₀ = 90,000 – 200P₀ + 3,000N + 100I +50P_C – 2,000P_g + 5A

 

Where Q₀ = Quantity demand of Oldsmobiles per year

P₀ = price of Oldsmobiles, in dollars

N = population of the United States, in millions

I = per capita disposable income, in dollars

P_C = price of Chevrolet automobiles, in dollars

P_g= real price of gasoline, in cents per gallon

A = advertising expenditures by Oldsmobile, in dollars per year

 

a)   Indicate the change in the number of Oldsmobiles purchased per year (Q₀) for each unit change in the independent, or explanatory, variables.

b)   Find the value of Q₀ if the average value of P_C = $10,000, N = 220 million, I = $12,000, P0 = $9,000, P_g = 100c, and A = $200,000.

c)   Derive the equation for the demand curve for Oldsmobiles, and

d)   Plot it

Answer 1

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