Answer to Question #14075 in Microeconomics for Amanda

Question #14075
35 points) Based on 21 months of past data, Ziggy’s Drive-In has determined that the demand for its hamburgers is given by the following equation:

Q = 205.2 - 200P + 100PC + 0.5Y + 23.0A
(110.9) (35.65) (49.5) (0.117) (8.712) (standard errors)

R2 = 0.74 SEE = 18.9

where Q = number of hamburgers sold per month, in thousands
P = price of Ziggy’s hamburgers, in dollars
PC = price of hamburgers for Ziggy’s major competitor, in dollars
Y = income per capita in the surrounding community, thousands of dollars
A = advertising expenditures during the previous month, thousands of dollars

Currently, Ziggy charges $1.00 for its hamburgers, while its closest competitor charges $1.20. Income per capita is $20,000, while advertising was $5,000 in the preceding month.

a. Evaluate the overall explanatory power of the regression model. Use a 0.05 level of significanc
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