Question

GE Healthcare wants to accurately project the demand for its computerized tomography (CT) scans. A member of FSU’s Economics class helped GE in the development and estimation of an econometric model that can be used to predict demand for this important line of products. Sales forecast is indispensable for budgeting and other financial and operating planning activities. The estimation of the econometric model is as follows:

Where: QCTGE= 6,100 – 0.05PCTGE+ 0.12PCTS – 2PR + 0.03I + 0.008A,

Q_CTGE= Quantity of CT scans sold by GE Healthcare

P_CTGE= Price of GE Healthcare CT scans

P_CTS= Price of Siemens Healthcare CT scans

P_R= Price of Radiologists per CT scan

I= Per capita income, and

A= Dollars spent annually on advertising

a. How many CT scans are expected to be sold next year, given the following values?

P_CTGE= $30,000

P_CTS= $40,000

P_R= $120

I= $60,000

A= $300,000

Answer 1