Managerial Economics (Mba 504)

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TERM EXAMINATION I Please read the instructions for each section carefully. There are VI sections. You are required to answer 1 question from each section. If you answer more than one question from a section, only the first question will be graded. Clearly state the question you are answering at the top of each response. Points for each section are in parentheses. Write your name on this test paper and hand it in after the test. Total points: 42 SECTION I: You are required to answer this question (6 ) 1. You are the sales manager of region 3 of your company. You asked your intern to determine the demand function for your region and present a report to your boss. You gave your intern data on quantity demanded (Qx), price of your product (Px), price of a substitute (Py), and average Income levels (Income). Your intern decided to run the regression using the logs of the values to obtain meaningful results. Following her presentation to your boss, you received the following note from your boss. “One of your MBA interns sent this spreadsheet in response to the question I asked regarding the potential impact of the 2.85% decline in incomes that has been forecasted for regional market. This is nuts – do they not teach people how to speak in words anymore? Can you help me out?” All I need to know are a. How good is this model in explaining our sales? Explain b. Do you detect any problems in her output? Explain SUMMARY OUTPUT Regression Statistics Multiple R 0.908 R Square 0.825 Adjusted R Square 0.797 Standard Error 0.059 Observations 30 Coefficients Standard Error t Stat P-value Intercept -3.24 3.74 -0.87 0.394 lnPx 2.020 0.44 4.60 0.000 lnPy -0.583 0.56 -1.041 0.308 lnincome 0.332 0.42 0.761 0.035 ANSWER a) This model is very good in explaining our sales as per the R-square and the

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