Answer to Question #117397 in Microeconomics for hafeezah

Question

Qx = 1500 - 10Px + 4Py + 1500A + 2(In)
(523) (2.2) (1.7) (500) (1.5)
R squared = 0.68
F = 35.3
Standard error of estimate = 565
Where Qx = quantity demand for iphoneX
Px = price of iphoneX (RM) = 7000
Py = price of related good (RM) = 8000
A = advertising expenditure in million (RM) = 54
(In) = income (RM) = 4000

Answer 1

Qx = 1500 - 10Px + 4Py + 1500A + 2(In)

Qx = 1500 – 10(7,000) + 4(8,000) + 1500(54) + 2(4,000)

Qx = 1500 – 70,000 + 32,000 + 81000 + 8,000

Qx = 52,500

At a price of 7,000RM, the quantity demand for iphoneX is 52,500. From the demand equation, a unit increase in the price of iphoneX by 1RM leads to a decrease in the quantity demanded of iphoneX by 10. Consequently, a unit increase in the price of related good by 1RM leads to an increase in the quantity demanded by 4 units. Price of related good, advertising expenditure and income have a positive linear relationship with the quantity of iphoneX demanded, while the price of iphoneX has a negative(inverse) relationship with the quantity of iphoneX demanded. The R squared results for the demand equation is 0.68 implying that the price of iphoneX (RM), price of related good (RM), advertising expenditure in million (RM) and income (RM) jointly account for 68% of the variations in the quantity demand for iphoneX.