Setting: U.S. Auto manufacturers are trying to develop a multivariate function w

Question

Setting: U.S. Auto manufacturers are trying to develop a multivariate function with which to estimate the demand for their gas-electric hybrid compact cars. Here is one that Motors General developed for its Jolt: Qi-65000 -20Pj + 20Pf+35Pt-5Pb +0.2Tc +0.05Y + 10Mg + 0.04A Where Oi-the number of Jolts demanded per week. the price of each new Jolt (in S) Pf- the price of each new Ford gas-electric hybrid (in S) Pt- the price of each new Toyota gas-electric hybrid (in S) Po= the price of replacement batteries for the Jolt (in $) Tc- the amount of tax credit incentive offered with the purchase of a new hybrid (in $) average weekly disposable income of a typical Jolt purchaser (in $) Mg -the miles per gallon of gas rating of the Jolt (in miles per gallon) A-average weekly Jolt advertising expenditure (in $) Engineering increases the miles per gallon of gas rating (Mg) by 10 miles per gallon. The manager of the advertising department should point out that demand for Jolts will: VII a. increase by 18 Jolts b. decrease by 17.5 Jolts c. increase by 17.5 Jolts d. decrease by 18 Jolts e. increase by 100 Jolts f. decrease by 100 Jolts

Explanation / Answer

Ans.

e.increase by 100 jolts

In the above multivariate function the relation between miles per gallon of gas rating and number of jolts demanded per week is positive.With increase in miles per gallon of gas rating there is increase in demand by 100 jolts i.e 10*10 = 100 jolts.

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