Group B presented the results of an OLS regression model analyzing the determinants of quantity for a company's units:
1) The demand function estimated is: Quantity = 135.15 - 0.14 * Price + 0.54 * Advertising - 5.78 * Distance.
2) Holding all else constant, a $100 increase in price would decrease quantity demanded by 14 units.
3) Price elasticity of demand is calculated to be -1.1, indicating demand is elastic. A rental price increase would decrease total revenue.
Group B presented the results of an OLS regression model analyzing the determinants of quantity for a company's units:
1) The demand function estimated is: Quantity = 135.15 - 0.14 * Price + 0.54 * Advertising - 5.78 * Distance.
2) Holding all else constant, a $100 increase in price would decrease quantity demanded by 14 units.
3) Price elasticity of demand is calculated to be -1.1, indicating demand is elastic. A rental price increase would decrease total revenue.
Group B presented the results of an OLS regression model analyzing the determinants of quantity for a company's units:
1) The demand function estimated is: Quantity = 135.15 - 0.14 * Price + 0.54 * Advertising - 5.78 * Distance.
2) Holding all else constant, a $100 increase in price would decrease quantity demanded by 14 units.
3) Price elasticity of demand is calculated to be -1.1, indicating demand is elastic. A rental price increase would decrease total revenue.
Group B presented the results of an OLS regression model analyzing the determinants of quantity for a company's units:
1) The demand function estimated is: Quantity = 135.15 - 0.14 * Price + 0.54 * Advertising - 5.78 * Distance.
2) Holding all else constant, a $100 increase in price would decrease quantity demanded by 14 units.
3) Price elasticity of demand is calculated to be -1.1, indicating demand is elastic. A rental price increase would decrease total revenue.
Q= 135.15-0.14P+0.54A-5.78D ii) Other things remaining constant, if the company raised rents at one complex by $100, the number of units rented will decrease by 14 units, which is shown by Q= -0.14*P I.e. Q= -0.14*100 = -14 iii) We know, Price elasticity of demand, ŋ= (P/Q)*(dQ/dP) = (420/53.1)*(-0.14) = -1.1 Here, dTR/dP = Q(1+ŋ) = 53.1 * (1-1.1) = -5.31 The company’s total revenues would decrease by $5.31 if the company raised rents at an apartment building. iv) From the above information, it can be concluded that the demand is elastic since ŋ < -1 and dTR/dP < 0. When the change in price is relatively low than the relative change in quantity demanded, the demand is elastic. When the rental price is raised by $100, the quantity demanded decreases by 14 units. When rent is raised at an average by $1, quantity demanded will decrease , hence total revenue will decrease by $5.31. Therefore an increase in price will decrease total revenue.