Question : PROBLEMS John Smith, the research manager for marketing the Chevrolet
PROBLEMS John Smith, the research manager for marketing the Chevrolet Division of the General Motors Corporation, has specified the following general demand function for Chevrolets in the United where Q is the quantity demanded of Chevrolets per year, is the price of Chevrolets. Nis lotion lis disposable income, P, is the price of Ford automobiles, P is the price of gasoline, A is the amount of advertising for Chevrolets, and P is credit incentives to purchase Chevrolets. Indicate whether you expect each independent or explanatory variable to be directly or inversely related to the quantity demanded of Chevrolets and the reason for your expectation. '2. Suppose that GM's Smith estimated the following regression equation for Chevrolet automobiles: 0." 100,000 100Pe 2.000W 50l 30P, 1.000P 3A 40,000P where quantity demanded per year of Chevrolet automobiles price of Chevrolet automobiles, in N lation of the United States, in millions income, in per capita disposable P, dollars automobiles, in dollars price of Ford Pa real price of gasoline, in cents per A gallon expenditures by Chevrolet. in dollars per year P, credit incentives to purchase Chevrolets, in percentage points below the rate of interest on borrowing in the absence of incentives (a) Indicate the change in the number of Chevrolets purchased per year (Q for each unit change in the independent or explanatory variables. (by Find the value of Q if the average value of Pe $9,000, N 200 million, I $10,000, P $8,000 Pa 80 cents, and A $200,000, and if P 1. (c) Derive the equation for the demand curve for Chevrolets. (d) Plot it. 3. Starting with the estimated demand function for Chevrolets given in Problem 2, assume that the average value of the independent variables changes to N 225 million, 1 S12,000, P, $10,000.