Business, 06.06.2020 22:00 568389

We are interested in learning about the demand response to advertising for our product. We collect data and model our demand with the following linear equation: Q=bo + b1 Addollars + b2 Compads + b3 Adcopy Addollars is our advertising expenditures per 100 potential customers over 6 months, Compads is our rival's advertising levels in the same region over the same time period. We have two versions of our advertisement captured by: Adcopy = 1 for emotional, Adcopy = 0 for rational verbiage. We estimate the following coefficients: Estimate bo = 32.59 bi = 1.48 b2 = -0.57 b3 = 2.13 T-Stat (12.9) (4.4) (3.5) (1.1) We are also able to estimate our competitor's advertising levels: Compads = co + c • Addollars + C2 · Adcopy with the following results: Estimate Co = 9.713 c = 0.851 C2 = 9.083 T-Stat (3.6) (2.0) (4.7) (a) 6 points Assuming we use the emotional advertising copy, write out our general demand equation using our estimates from the table(s): (b) 6 points Suppose we set Addollars = 8, use your equation above to estimate our advertising elasticity. (c) 6 points Assuming our price elasticity of demand, n = -2, then our advertising level should be approximately what percentage of our sales?

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We are interested in learning about the demand response to advertising for our product. We collect d...

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