Answer to Question #60199 in Microeconomics for Maha

Question

Use the data in the following table to answer the questions at the end of this Part 1.
Market segment Sales (‘000 units) Advertising
expenditure
(RM’000)
Selling Price
(RM per unit)
Disposable
Income
(RM’000)
1 160 150 15.00 19.0
2 220 160 13.50 17.5
3 140 50 16.50 14.0
4 190 190 14.50 21.0
5 130 90 17.00 15.5
6 160 60 16.00 14.5
7 200 140 13.00 21.5
8 150 110 18.00 18.0
9 210 200 12.00 18.5
10 190 100 15.50 20.0

Add disposable income as an independent variable and regress sales on both selling price and
disposable income.
I. What is the estimated regression equation?

II. Is the co-efficient on selling price in (a) and (b) the same? Why or why not?
III. What is the income elasticity according to the model at a disposable income level of
RM18,500 and at a selling price of RM12.00 per unit?