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Q i. John Smith, the research manager for marketing at the Chevrolet
Division of the General Motors Corporation, has specified the following
general demand function for Chevrolets in the United States:
QC = f(PC, N, I, PF, PG, A, PI)
Where QC is the quantity demanded of Chevrolets per year, PC is the price
of Chevrolets, N is population, I is disposable income, PF is the price of
Ford automobiles, PG is the price of gasoline, A is the amount of
advertising for Chevrolets, and PI is credit incentives to purchase
Chevrolets. Indicate whether you expect each independent or explanatory
variable to be directly or inversely related to the quantity demanded of
Chevrolets and the reason for your expectation.
ii. Suppose that GM's Smith estimated the following regression equation for
Chevrolet automobiles:
QC = 100,000 - 100PC + 2,000N + 50I + 30PF - ,000PG + 3A + 40,000 PI
Where
QC= quantity demanded per year of Chevrolet automobiles
PC = price of Chevrolet automobiles, in dollars
N = population of the United States, in millions
I = per capita disposable income, in dollars
PF = price of Ford automobiles, in dollars
PG = real price of gasoline, in cents per gallon
A = advertising expenditures by Chevrolet, in dollars per year
PI = credit incentives to purchase Chevrolets, in percentage
points below the rate of interest on borrowing in the
absence of incentives
a. Indicate the change in the number of Chevrolets purchased per year (QC)
for each unit change in the independent of explanatory variables.
b. Find the value of QC if the average value of PC = $9,000, N = 200
million, I = $10,000, PF = $8,000,
PG = 80 cents, A = $200,000, and if PI = 1.
c. Derive the equation for the demand curve for Chevrolets.
d. Plot it.
Division of the General Motors Corporation, has specified the following
general demand function for Chevrolets in the United States:
QC = f(PC, N, I, PF, PG, A, PI)
Where QC is the quantity demanded of Chevrolets per year, PC is the price
of Chevrolets, N is population, I is disposable income, PF is the price of
Ford automobiles, PG is the price of gasoline, A is the amount of
advertising for Chevrolets, and PI is credit incentives to purchase
Chevrolets. Indicate whether you expect each independent or explanatory
variable to be directly or inversely related to the quantity demanded of
Chevrolets and the reason for your expectation.
ii. Suppose that GM's Smith estimated the following regression equation for
Chevrolet automobiles:
QC = 100,000 - 100PC + 2,000N + 50I + 30PF - ,000PG + 3A + 40,000 PI
Where
QC= quantity demanded per year of Chevrolet automobiles
PC = price of Chevrolet automobiles, in dollars
N = population of the United States, in millions
I = per capita disposable income, in dollars
PF = price of Ford automobiles, in dollars
PG = real price of gasoline, in cents per gallon
A = advertising expenditures by Chevrolet, in dollars per year
PI = credit incentives to purchase Chevrolets, in percentage
points below the rate of interest on borrowing in the
absence of incentives
a. Indicate the change in the number of Chevrolets purchased per year (QC)
for each unit change in the independent of explanatory variables.
b. Find the value of QC if the average value of PC = $9,000, N = 200
million, I = $10,000, PF = $8,000,
PG = 80 cents, A = $200,000, and if PI = 1.
c. Derive the equation for the demand curve for Chevrolets.
d. Plot it.