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In: Economics

Fluidyne Corporation manufactures and sells water filters. The economic forecasting unit of the company has supplied...

Fluidyne Corporation manufactures and sells water filters. The economic forecasting unit of the company has supplied the following demand equation:   

QB=    2000 -     5PB +   2.5PC   +   0.82Y   + 0.6AB

          (1200)       (1.5)       (1.2)            (0.5)      (0.2)

Where,

QB=quantity sold

PB=price per unit

PC=average unit price of competitor’s product

Y=income per household

AB=advertising expenditure

           

            R2= 0.86

S.E.E=5

Standard error of coefficients in parentheses (1200) (1.5) (1.2,) (0.5) , ( 0.2)

Given, PB=$50,    PC=$45,      AB=$12,500      Y=$2,000

  1. Does each independent variable have a significant effect on the sales of Fluidyne water filters?
  2. Interpret the coefficient of variables that are significant?
  3. Interpret the coefficient of determination(R2)
  4. Determine the monthly quantity demanded sold (QB) for water filter?
  5. Is the quantity demanded for water filter (QB) sensitive to its own price?
  6. Is water filter a luxury or necessity?

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