QUESTION TWO Ivy, a General Manager at Mumias Sugar Company, estimated a multiplicative demand function of the form: Qd = aPapIªiPoª• _using a cross-section data collected in the company sales on 30th...


QUESTION TWO<br>Ivy, a General Manager at Mumias Sugar Company, estimated a multiplicative demand<br>function of the form: Qd = aPapIªiPoª• _using a cross-section data collected in the<br>company sales on 30th June, 2016. The estimation results are as follows:<br>Constant<br>Price (P) Income (I) Price of Other Good (P0)<br>Estimated coefficient<br>0.022<br>-0.223<br>1.354<br>0.133<br>Standard Error<br>0.012<br>0.056<br>0.502<br>0.814<br>t-statistic<br>(1.19)<br>(-3.98)<br>-2.69<br>-0.13<br>Number of Observations, n = 210; R-squared = 0.7516<br>Critical Students' t = 1.96 at 5% Level of Significance<br>a) How would the coefficients and R² value be interpreted?<br>b) What will the quantity demanded be if the values of the independent variables are:<br>Price = 20; Income per capita = Ksh 500; and the Price of the Other Good = Ksh 30?<br>

Extracted text: QUESTION TWO Ivy, a General Manager at Mumias Sugar Company, estimated a multiplicative demand function of the form: Qd = aPapIªiPoª• _using a cross-section data collected in the company sales on 30th June, 2016. The estimation results are as follows: Constant Price (P) Income (I) Price of Other Good (P0) Estimated coefficient 0.022 -0.223 1.354 0.133 Standard Error 0.012 0.056 0.502 0.814 t-statistic (1.19) (-3.98) -2.69 -0.13 Number of Observations, n = 210; R-squared = 0.7516 Critical Students' t = 1.96 at 5% Level of Significance a) How would the coefficients and R² value be interpreted? b) What will the quantity demanded be if the values of the independent variables are: Price = 20; Income per capita = Ksh 500; and the Price of the Other Good = Ksh 30?

Jun 10, 2022
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