# A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and…

Q1. A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product:

Q = 15,000 – 2.8 P + 150 A + 0.3 Ppc + 0.35 Pm + 0.2 Pc

(4234)   (1.29)  (175)   (0.12)        (0.17)        (0.13)

R^2 = 0.68          F= 21.25

The variables and their estimated values are:

Q = Quantity

P = Price of the basket = \$7000

A = Advertising expenditures = \$52000

Ppc = Average price of personal computer = \$4000

Pm = Average price of minicomputer = \$15,000

Pc = Average price of a leading competitor’s workstation = \$8,000

(  ) the number in brackets is the standard error of estimation SEE

The t-test is = coefficient of variable/SEE

a.      Compute the elasticity of each variable.

b.     What would happen to Quantity if price (P) increased by \$500

c.      What would happen to Quantity if average price of personal computer decreases by \$1000.

d.     Conduct a t-test for the statistical significance of each variable. Which ones are significant at 5% level of significance.

e.     What does the value of R^2 mean for this test.