# Computer Sales

Advanced Technology Corporation (ATC) manufactures a home computer system and has hired a market research team to analyze the potential demand for this product using historical data on sales of similar products in 66 regions of the country in conjunction with information from consumer surveys. The research firm estimated the following demand function: Q = -36,000 – 10P + 2Px + 300I + 24A – 0.01Asquared, where Q=annual demand in units, P=price of ATC computer (\$), Px=price of ATC major competitor computer (\$), I = average family disposable income (\$100), and A = advertising by ATC (\$100).

Question

Using situation 8.2.2, the correct interpretation of the coefficient for Px (i.e., +2) is:
A) An increase of computer sales of one unit will occur if there is a \$2 increase in the price of the competitor’s computer holding constant P, I, and A.
B) An increase of computer sales of one unit will occur if there is a \$200 increase in the price of the competitor computer, holding constant P, I, and A.
C) A \$1 increase in the price of the competitor’s computer will increase ATC computer sales by 2 units, holding constant P, I, and A.
D) A \$1 increase in the price of the competitor’s computer will increase ATC computer sales by 200 units, holding constant P, I and A.

Question

Suppose you review the information in situation 8.2.2 and plan to test the explanatory power of: 1. the overall model and 2. a one-tail test of the individual coefficients, both at the .05 level of significance, then what critical values would you use for your tests? The first answer refers to tests for the model; the second answer refers to the test for the individual variable coefficient.
A) F=2.37 and t=1.671
B) t=1.671 and F=2.37.
C) F=2.25 and t=1.671
D) t=2.00 and F=2.37.

For this question, none of the options is right. (The correct answer is F = 2.52 and t = 1.671)

Question

Using situation 8.2.2, what would happen to computer sales if ATC increased the advertising budget by \$1000 (check units of measurement before you start to answer)?
A) Sales would increase by approximately 240 units.
B) Sales would increase by approximately 241 units.
C) Sales would increase by approximately 24,000 units.
D) Sales would increase by approximately 14,000 units.

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