estimating car demand demand function for car industry q = a 1 p + a 2 p x + a 3 i + a 4 pop + a 5 i...
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![Page 1: Estimating Car Demand Demand Function for Car Industry Q = a 1 P + a 2 P x + a 3 I + a 4 Pop + a 5 i + a 6 A Demand Equation for Car Industry Q = -500P](https://reader036.vdocuments.net/reader036/viewer/2022082506/5697bf901a28abf838c8de39/html5/thumbnails/1.jpg)
Estimating Car Demand
• Demand Function for Car Industry
Q = a1P + a2Px + a3I + a4Pop + a5i + a6A
• Demand Equation for Car Industry
Q = -500P + 210Px + 200I + 20,000Pop - 1,000,000i + 600A
![Page 2: Estimating Car Demand Demand Function for Car Industry Q = a 1 P + a 2 P x + a 3 I + a 4 Pop + a 5 i + a 6 A Demand Equation for Car Industry Q = -500P](https://reader036.vdocuments.net/reader036/viewer/2022082506/5697bf901a28abf838c8de39/html5/thumbnails/2.jpg)
Estimating Industry Demand for New Cars
Independent Variable Parameter Estimate
(i)
Estimated Value for Independent Variable During the Coming Year (ii)
Estimated Demand
(i x ii)
Average Price for New Cars in $ (P)
-500 $25,000 -12,500,000
Average Price for New Import Luxury Cars in $ (Px)
210 $50,000 10,500,000
Disposable Income per Household in $ (I)
200 $45,000 9,000,000
Population in millions (pop)
20,000 300 6,000,000
Average Interest Rate in % (i)
-1,000,000 8% -8,000,000
Industry Advertising Expenditures in $ millions (A)
600 $5,000 3,000,000
Total Demand (cars) 8,000,000
![Page 3: Estimating Car Demand Demand Function for Car Industry Q = a 1 P + a 2 P x + a 3 I + a 4 Pop + a 5 i + a 6 A Demand Equation for Car Industry Q = -500P](https://reader036.vdocuments.net/reader036/viewer/2022082506/5697bf901a28abf838c8de39/html5/thumbnails/3.jpg)
• Demand function specifies relation between Quantity Demanded and all variables affecting Demand
• Demand Curve – relation between price and quantity demanded, holding all else constant
• Q = - 500P + 210 (50,000) + 200(45,000) + 20,000 (300) - 1,000,000(8) + 600(5,000)
• Equation of Demand Curve Q = 20,500,000 - 500P