Assignment 1 – Demand Estimation – Option 1

Introduction

The main objective of this paper is to assess the properties of the demand function for the 3-packs. The demand is given by

where the variables are

& \text{Q}~\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,=~\text{Quantity demanded of 3}-\text{pack units} \\

& \text{P }\left( \text{in cents} \right)~\,\,\,\,\,\,\,=~\text{Price of the product} \\

& \text{PX }\left( \text{in cents} \right)\,\,\,=\text{Price of leading competitor}\text{s product} \\

& \text{I}\left( \text{in dollars} \right)~\,\,\,\,\,=\text{Per capita income of the standard metropolitan statistical area in which the } \\

& \,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\text{supermarkets are located} \\

& \text{A }\left( \text{in dollars} \right)=\text{Monthly advertising expenditures} \\

& \text{M = Number of microwave ovens sold in the standard metropolitan statistical area in which the } \\

& \,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\,\text{supermarkets are located} \\

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