# The maker of a leading brand of low-calorie microwavable food

The maker   of a leading brand of low-calorie microwavable food estimated the following   demand equation for its product using data from 26 supermarkets around the   country for the month of April:      Q=5,200-42P+20Px+5.2I+0.20A+0.25M   (2.002)  (17.5)   (6.2) (2.5) (0.09)  (0.21)   R2=0.55              n=26           F=4.88      Assume the following values   for the independent variables:      Q= quanity sold per month   P(in cents) = Price of the   product = 500   Px(in cents) = Price of   leading competitor’s product =600   I(in dollars) = Per capita   income of the standard metropolitian statistical area (SMSA) in which the   supermarket is located = 5,500   A(in dollars) = Monthly   advertising expenditures = 10,000   M = Number of microwave ovens   sold in the SMSA in which the supermarket is located= 5,000   Using the information, answer   the following questions:   a. Compute elasticities for   each variable   b. How concerned do you think   this company would be about the impact of a recession on its sales? Explain   c. Do you think that this firm   should cut its price to increase its market share? Explain   d. What proportion of the   variation in sales is explained by the independent variables in the   equations?  How confident are you about this answer? Explain