Below is given a multiple regression in which the dependent variable is the quantity demanded. Q...
Question:
Below is a multiple regression in which the dependent variable is the quantity demanded. {eq}Qx {/eq}, of movie tickets at the theater, and the independent variables are, {eq}Px {/eq} is the movie ticket price in dollars {eq}Py {/eq} is the price of a redbox {eq}DVD {/eq} rental in dollars, {eq}I {/eq} is income in dollars, and {eq}ADV {/eq} is advertising expenditures in dollars.
{eq}Qx=11,600-5,000Px+3,500Py+35I+1,000ADV {/eq}
The regression was estimated for 62 movie outlets.
When {eq}Px = $6, Py = $2, I = $40, {/eq} and {eq}ADV = $20 {/eq}, the point price elasticity of demand equals:
a) -3.0
b) -0.3333
c) -1.00
d) -0.5033
Regression summary output
Regression statisitc
| R square | 0.5557 |
| Adjusted R square | 0.5329 |
| Standard error | 7211.848 |
| Observation | 62 |
| F | Significance F |
| 24.395 | 0.000 |
| Coefficient | Standard error | |
| Intercept | 6,600 | 5050.9 |
| Px | -5,000 | 1,001.5 |
| Py | 3,500 | 1,750 |
| I | 35 | 19.5 |
| ADV | 1,000 | 333 |
Price Elasticity of Demand:
Price elasticity of demand measures the responsiveness of the quantity demanded to changes in price. The point price elasticity of demand is the price elasticity of demand at a particular point on the demand curve.
Answer and Explanation: 1
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The point price elasticity of demand equals a) -3.0
Plug all the above information to calculate the quantity demanded when price of movie ticket...
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Price Elasticity of Demand: Definition, Formula & Example
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