The demand for hamburgers is estimated from this theoretical model: Q

The demand for hamburgers is estimated from this theoretical model:

Q = kPaIbAce,
where Q = units per day, P = price per unit, A = advertising budget per month by sellers, I = per capita income of consumers, and e = a random error. In a recent study, one researcher estimated the log-linear form of this equation with regression analysis as:
log Q = 2.5 – 0.33 log P + 0.15 log I + 0.2 log A.
Explain what the coefficients of log P, log I, and log A reveal about this product.

ANSWER

The coefficients of the variables are the respective elasticities of demand. The price elasticity is (-0.33), income elasticity is 0.15, and advertising elasticity is 0.2. These coefficients indicate that the product is relatively price inelastic, is a normal good, and is responsive to advertising outlays by sellers.