# ECO 550

The following is the equation information from assignment 1. I am attaching the instructions for assignment 2 at the bottom:

Imagine that you work for the maker of a leading brand of low-calorie frozen, microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.

**Estimated Demand Equation**è Q_{D}= – 5200 – 42(P) + 20(Px)+ 0.52( I )+ 0.20(A) + 0.25(M)

Standard Errors of Estimate è (2.002) (17.5) (6.2) (2.5) (0.09) (0.21)

(for calculating “t-values”

Other Regression statistics n = 26 R^{2} = 0.55 F = 4.88

**Note:** In the above regression equation, Q_{D} is the “dependent variable” and the variables on the right hand side of the equation all are “independent variables. For a refresher on independent and dependent variables, please go to Sophia’s Website and review the Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independent-and-dependent-variables–3.

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Your supervisor has asked you to compute the elasticities for each independent variable in the above demand equation. Assume the following values for the independent variables:

Q_{D} = Quantity demanded of 3-pack units for your company’s frozen food

P (in dollars) = Price of the product = $5 per 3-pack unit

Px (in dollars) = Price of leading competitor’s product = $6 per 3-pack unit

I (in dollars) = Per capita income of the standard metropolitan statistical area

(SMSA) in which the supermarkets are located = $5,500

A (in dollars) = Monthly advertising expenditures = $10,000

M = Number of microwave ovens sold in the SMSA in which each

Supermarket is located = 5,000