# value for each independent variable’s coefficient estimate The MacWend Drive-In has determined that

value for each independent variable’s coefficient estimate

The MacWend Drive-In has determined that demand for hamburgers
is given by the following equation:

Q = 2052 + 230A – 2000PM + 1000PC + 05I

(185) (264) (-561) (202) (425)

where Q is the number of hamburgers sold per month (in
1,000s), A is the advertising expenditures during the previous month (in
\$1,000), PM is the price of MacWend burgers (dollars), PC is the price of
hamburgers of the company’s major competitor (dollars), and I is income per
capita in the surrounding community (in \$1,000) The t-statistics for each
coefficient is shown in parentheses below each coefficient

1 How would you interpret the value for each independent
variable’s coefficient estimate?

2 Are the signs of the individual coefficients consistent
with predictions from economic theory? Explain

3 If A = \$5,000, PM = \$1, PC = \$120, and I = \$20,000, how
many hamburgers will be demanded?

4 What is the advertising elasticity at A = \$5,000?