Wilpin Company, a price-setting firm, produces nearly 80 percent of all tennis b

Question

Wilpin Company, a price-setting firm, produces nearly 80 percent of all tennis balls purchased in the United States. Wilpen estimates the U.S. demand for its tennis balls by using the following liner specification:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Q = a +bP + cM + dPr

Where Q is the number of cans of tennis balls sold quarterly, P is the wholesale price Wilpen charges for a can of tennis balls, M is the consumers' average household income, and Pr is the average price of tennis rackets. The regression results are as follows:

DEPENDENT VARIABLE: Q        R-SQUARE        F-RATIO     P-VALUE ON F

             OBSERVATIONS: 20      0.8435               28.75            0.001

                        PARAMETER          STANDARD

VARIABLE      ESTIMATE               ERROR                  T-RATIO   P-VALUE

INTERCEPT      425120.0             220300.0               1.93            0.0716

P                     -37260.6                 12587                    -22.96         0.0093

M                    1.49                        0.3651                     4.08           0.0009

PR                -1456.0                      460.75                   -3.16           0.0060

a. Discuss the statistical significance of the parameter estimate a, b, c, and d using the p-values. Are the signs of b, c, and d consistent with the theory of demand?

Wilpen plans to change a wholesale price of $ 1.65 per can. The average price of a tennis racket is $110, and consumer

Explanation / Answer

A)The p-value associated with b is consistent with the theory of demand - if the prices rise, the quantity sold will then drop.

The p-value associated with c is consistent with the theory of demand

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