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Q = 205.2 + 23.0A - 200.0PM + 100.0PC + 0.5I
(1.85) (2.64) (-5.61) (2.02) (4.25)
where Q is the number of hamburgers sold per month (in 1,000s), A is the advertising expenditures during the previous month (in $1,000), PM is the price of MacWend burgers (dollars), PC is the price of hamburgers of the company's major competitor (dollars), and I is income per capita in the surrounding community (in $1,000). The t-statistics for each coefficient is shown in parentheses below each coefficient.
(A)Are the signs of the individual coefficients consistent with predictions from economic theory? Explain.
(B). If A = $5,000, PM = $1, PC = $1.20, and I = $20,000, how many hamburgers will be demanded?
(C). What is the advertising elasticity at A = $5,000?
a. For this equation, write the expression for the point price and cross elasticities of demand as function of Px and P0.
b. what is the relationship between the price and cross elasticities ?