Question

1. Moyer Winery is the maker of high-quality champagne. A linear regression model used to estimate the demand function for Moyer’s champagne yielded the following results:

Q_d=10,425-2910P_x+0.28A+11,100P_op

                 (1,010)    (0.004)   (3,542)

Where Q_D = quantity of Moyer champagne demanded

           P_x = price of Moyer champagne

           A = Moyer Winery advertising in dollars

          P_op = percentage of the U.S. population over 21 years of age

1. Determine the point price elasticity for prices of $5 and $10, when A = $1,000,000 and P_op = .5.
2. Determine the point advertising elasticity at an advertising level of $2,000,000, if price remains at $5 and P_op = .5.
3. The standard error for each coefficient is given in parentheses. If you know that the demand function was estimated using 25 observations, can you reject at the 95-percent confidence level the hypothesis that there is no relationship between each of the independent variables and Q_D?

Answer 1

Answer 1)

Qd=10425-2910*Px+0.28*A+11100*Pop

When Px=$5 & Pop=0.5

Qd=10425-2910*5+0.28*1000000+11100*0.5

Qd=