One of the leading television providers has estimated thefollowing demand equation after analyzing 36 regional markets:

  Q =   + 25,000 – 45P +20A + 25Pc - 30Ac + 110 I

   (12000) (20.2) (14)   (9)     (48)      (50)                     

         R^{2   =}0.86           F= 28.52

          Thevariables and their assumed values are

          Q =Quantity

          P = Priceof the basic Model = 1200 (dollars)

          A =Advertising Expenditures = 90 (thousand dollars)

Pc = Average price of the competitor’s product = 1400(dollars)

Ac = competitor’s advertising expenditures = 80 (thousanddollars)

  I = per capita income = 60(thousand dollars)

1. Compute the elasticities for each variable. On this basis,discuss the relative impact that each variable has on the demand.What implications do these results have for the firm’s marketing,pricing, and production policies?
2. What would be the effect of a 6 unit increase in thecompetitor’s advertising expenditures?
3. What would be the change in your advertising expenditures tooffset your competitor’s strategy?
4. Conduct a t-test for the statistical significance ofeach variable. Discuss the results of the t-tests in light of thepolicy implications mentioned.
5. What proportion of the variation in sales is explained by theindependent variables in the equation? How confident are you aboutthis answer? Explain conducting an F-test.