Economics questions :(

[olivejuice587]

Suppose that General Manager of Toyota estimated the following regression equation for demand of his product
Q1 = 100000-100Pt + 2000N + 50I + 30Ph - 1000Pg + 3.4A

Where Q1 = quantity demanded of Toyota per year
Pt = Price of toyota car
N = Population of country
I = per capita disposable income
Ph = Price of Honda
Pg= Price of Gasoline
A = Advertising expenditure by toyota company

a) Indicate the change in the number of toyota purchased per year Q1 for each unit change in the independent or explanatory variable.
b) Derive the equation for the demand curve for Toyota and plot this demand curve

[waqas izhar]

it is a question from statistics. learn regression analysis and then you will be able to solve this question...

[Faiza Sultana]

Originally Posted by olivejuice587

Suppose that General Manager of Toyota estimated the following regression equation for demand of his product
Q1 = 100000-100Pt + 2000N + 50I + 30Ph - 1000Pg + 3.4A

Where Q1 = quantity demanded of Toyota per year
Pt = Price of toyota car
N = Population of country
I = per capita disposable income
Ph = Price of Honda
Pg= Price of Gasoline
A = Advertising expenditure by toyota company

a) Indicate the change in the number of toyota purchased per year Q1 for each unit change in the independent or explanatory variable.
b) Derive the equation for the demand curve for Toyota and plot this demand curve

a) Indicate the change in the number of toyota purchased per year Q1 for each unit change in the independent or explanatory variable

there are 6 explanatory variables plus one constant term. each explanatory variable is affecting the purchase of toyota car, so there will be separate explanation for each variable. let's see one by one:

Pt: treating all other variables as constants, if price of toyota car increases by one unit, purchase of toyota car will decrease by 100 units.

N: treating all other variables as constants, if population of country increases by one unit, purchase of toyota car will increase by 2000 units.

I: treating all other variables as constants, if per capita disposable income increases by one unit, purchase of toyota car will increase by 50 units.

Ph: treating all other variables as constants, if price of honda car increases by one unit, purchase of toyota will increase by 30 units.

Pg: treating all other variables as constants, if price of gasoline increases by one unit, purchase of toyota will decrease by 1000 units.

A: treating all other variables as constants, if advertising expenditures by toyota company increase by one unit, purchase of toyota will increase by 3.4 units.

Constant term: If there is no variable affecting the purchase of toyota car, then the purchase of toyota car will be 100000.

Notice that increase or decrease in purchase of toyota car depends upon the sign of coefficient of explanatory variable. when the sign of explanatory variable is positive, its increase will increase the purchase of toyota car, and when the sign is negative, its increase will decrease the purchase of toyota car. and when we are interpreting constant term, we take the effect of all explanatory variables as zero.

b) Derive the equation for the demand curve for Toyota and plot this demand curve

demand function of a commodity is given as:
Qd = f(P) i.e. quantity demanded depends upon its price (keeping all other factors constant).
there is inverse relation b/t a commodity and its price. if price of a commodity increases, its demand will decrease and vice virsa.
so the demand equation for toyota car will be: Q=100000-100Pt
here we are treating other six explanatory variables as constants to derive the demand curve of toyota car.
Now by putting different values for Pt, you will get a specific value of Q. it will be the demand for toyota at that particular price. substitute different prices one by one, and you will get different quantities accordingly.
Now plot these prices and quantities in a graph with quantity on x axis and price on y axis. you will get the negatively sloped demand curve for toyota car.