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ATTACH ASSIGNMENT and REQUIREMENTS FIRST BEFORE REPLYING
PLEASE READ REQUIREMENTS AND ASSIGNMENT AND ANY ATTACHED DOCUMENTS – (IF ANY) – BEFORE OFFERING TO ACCEPTING ASSIGNMENT.
See requirements and carefully read assignment and attached documents – if any – before offering to accepting assignment.
Due: February 09, 2018 by 6:00 pm EST
Paper to be written in APA Format – work MUST be CITED in paper and properly if work is cited from a text book – WITH page number(s) and must be included in citation in work product.
CHECK SPELLING and GRAMMAR.
Work MUST be ORIGINAL and PLAGIARISM FREE
NOTE: PAPER WILL BE RUN THROUGH TURNITIN AND GRAMMARLY
Running head: ASSIGNMENT 1: DEMAND ESTIMATION
1
DEMAND ESTIMATION 8
Demand Estimation
1. Compute the elasticity for each independent variable. Note: Write down all of your calculations.
OPTION # 2
The given equation is “QD =-2000 -100P +15A +25PX + 10I”
By putting the values for variables, we calculate the quantity demanded
QD = 2000-100(200 cents) +15($640) + 25 (300cents) +10 ($5,000)
QD = 2000-100($200) +15($640) + 25 ($300) +10 ($5,000) = 9600+7500+50000-20000
2000=45100
“
Price
elasticity”
Using regression equation ” “
Price elasticity
Competitor’s Elasticity
Income Elasticity
Advertising Elasticity
2. Determine the implications for each of the computed elasticity for the business regarding short-term and long-term pricing strategies. Provide a rationale in which you cite your results.
The
price
elasticity is negative, and it is less than one (1) which means the demand for the product is inelastic. The company can increase its prices to increase the revenues as one (1%) percent increase in the price will decrease the demand by only 0.443 percent which means the total revenue will still increase.
The elasticity of the demand for the competitor’s price is also inelastic as it is 0.1662 which means if the price of the competitor increases or decreases; it has no significant impact on the quantity demand for the company’s products. The company does not have to worry about the prices of the competitor’s prices in short run, but in the long run, this may change.
The advertising elasticity of the product demand is also low as it is 0.213 which means one percent increase in the advertising expenses will increase the demand for the product by 0.213. This tells that the increase in the advertisement will not automatically increase the demand for the product.
The income elasticity is the only one that is higher than one (1) which is 1.109 which means if the average income of the consumer is increased by one (1%) percent then the demand for the product will increase by 1.109% which means the demand is elastic. So the company should increase the prices when the average income of the consumer is increased.
The demand for the product is only elastic to the income of the consumer and it is almost insensitive to the price of the competitors and the advertising expenses. This means that the company should not worry about the prices of the competitors and should try to cut the costs of the advertising. However, the company should have a close eye on the income of the consumer.
The elasticity of income is 1.109. This is an indication that a one (1%) percent rise in the average income of the consumer will boost the demanded quality by 1.109. The product is elastic. The company can, therefore, decide to increase the price if the average income increases. (B. Curtis Eaton, Eaton, and Allen, 1988/2011) This implies that the demanded quality is highly sensitive to the income of the consumer and the product price. It is almost insensitive to the price of the competitor product and the advertising price.
3. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.
In short run, I will recommend the company not to cut the prices as the demand for the product is almost inelastic to price of the competitors and advertising and to price its product. The company can increase the price if needed to meet the increasing expenses or achieving the required revenue. However, in the long run, the company should have a close look at the average income of the consumer because the demand is elastic to income. So if in case the average income of the consumer is decreased then the price cut should be done and vice versa. (Colander, 1986/2017)
4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the prices are 100, 200, 300, 400, 500, 600 cents.
a.) Plot the demand curve for the firm.
Assuming that all the other factors are constant, the equation is:
For 100
= =55100
For 200
= =45100
For 300
= = 35100
For 400
= =25100
For 500
= =15100
For 600
== 5100
600
5100
b.) Plot the corresponding supply curve on the same graph using the following supply function (with the same prices 100, 200, 300, 400, 500, and 600 cents):
Price
Quantity Q
Quantity S
For 100
55100
0
For 200
45100
7909.9
For 300
35100
15819.8
For 400
25100
23729.7
For 500
15100
31639.6
For 600
5100
39549.5
c
c.) Determine the equilibrium price and quantity. (Show this graphically and calculate using algebra.)
d.) Outline the significant factors that could cause changes in supply and demand for the product. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.
The significant factors for the demand of the product are; the price, the average income of the consumers, costs of ingredients, tastes of the consumers. Speculations for the changes in the prices in future, political stability, government regulations and laws are the significant factors for the changes in the demand. (Adelman & Taft Morris, 1968) The company does not have to so concerned regarding these factors as they are not that associated with the demand for the product. Tthe income of the consumer is related to the demand for the products, and if the income of the consumers is increased, then the company can increase the prices of the product. (Ibrahim, G; Kedir, and Ledezma, 2007)
5. What short-term and long-term changes in market conditions could shift the demand and supply curves for this product?
The shift in the demand and supply curve may be because of the changes in demand or supply or both. 48(Pindyck & Rubinfeld, 1988/2017) An increase will shift the curve to the right, and a decrease will shift the curve to left. A decrease in demand may come from a situation like the complementary product price increase decrease with the income of the consumer and some other factors. This increase can shift the demand and supply curve to left. An increase may happen when the income of the consumer is increased, or prices of the complementary products are decreased.
References
Adelman, I. and Taft Morris, C. (1968). Performance Criteria For Evaluating Economic Development Potential: an Operational Approach. Journal of Economics, 82(2), 260-280. doi:
https://www.jstor.org/stable/1885897?seq=1#page_scan_tab_contents
27
Colander, D. C. (2017). Microeconomics (10th ed.). New York, N.Y., McGraw-Hill Education. (Original work published 1986) 6
B. Curtis Eaton, B. C., Eaton. D. F., and Allen, D. A. (2011). Microeconomics: Theory with Applications (8th ed.). North York, Ontario, Canada, Pearson Education Canada. (Original work published 1988) 6
Ibrahim, G; Kedir, A. M. and Ledemza, S. T. (2007, March). Household level Credit Constraint in Urban Ethiopia: A Discussion Paper number -03/07. Paper presented at University of Leicester, Department of Economics, Lancaster, U. K.
Pindyck, R. S., & Rubinfeld, D. L. (2017). Microeconomics (9th ed.). Upper Saddle River. N.J.: Pearson Education Limited. (Original work published 1988) 6
Reference:
price, quantity demanded curve
Quantity D 100 200 300 400 500 600 55100 45100 35100 25100 15100 5100 Price
Quantity demanded
Demand, supply curve
Quantity D 100 200 300 400 500 600 55100 45100 35100 25100 15100 5100 Quantity S 100 200 300 400 500 600 0 7909.89 15819.780000000002 23729.670000000002 31639.559999999921 39549.450000000012 price
quantity supplied and demanded
Assignment 1_Demand Estimation
Imagine that you work for the maker of a leading brand of low-calorie, frozen microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.
For a refresher on independent and dependent variables, please go to Sophia’s Website and review the Independent and Dependent Variables tutorial, located at
http://www.sophia.org/tutorials/independent-and-dependent-variables–3
.
Option 2
NOTE: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.
QD = -2,000 – 100P + 15A + 25PX + 10I
(5,234) (2.29) (525) (1.75) (1.5)
R2 = 0.85 n = 120 F = 35.25
Your supervisor has asked you to compute the elasticities for each independent variable.
Assume the following values for the independent variables:
Q = Quantity demanded of 3-pack units
P (in cents) = Price of the product = 200 cents per 3-pack unit
PX (in cents) = Price of leading competitor’s product = 300 cents per 3-pack unit
I (in dollars) = Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,000
A (in dollars) = Monthly advertising expenditures = $640
Write a five to seven (5-7) page paper in which you:
1. Compute the elasticities for each independent variable. Note: Write down all of your calculations.
2. Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.
3. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.
4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600 cents.
a. Plot the demand curve for the firm.
b. Plot the corresponding supply curve on the same graph using the following MC / supply function Q = -7909.89 + 79.1P with the same prices.
c. Determine the equilibrium price and quantity.
d. Outline the significant factors that could cause changes in supply and demand for the low-calorie, frozen microwavable food. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.
5. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves for the low-calorie, frozen microwavable food.
6. Use at least three (3) quality academic resources in this assignment.
NOTE: Wikipedia does not qualify as an academic resource.
Your assignment must follow these formatting requirements:
· Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
· Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
· Analyze how production and cost functions in the short run and long run affect the strategy of individual firms.
· Apply the concepts of supply and demand to determine the impact of changes in market conditions in the short run and long run, and the economic impact on a company’s operations.
· Use technology and information resources to research issues in managerial economics and globalization.
· Write clearly and concisely about managerial economics and globalization using proper writing mechanics.
Assignment 2_Operations Decision
Due: 09 February 2018, by 6:00pm EST
Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.
Use the Internet to research two (2) of the leading competitors in the low-calorie frozen, microwavable food industry, and take note of their pricing strategies, profitability, and their relationships within the industry (worldwide).
Write a six to eight (6-8) page paper in which you:
1. Outline a plan that will assess the effectiveness of the market structure for the company’s operations.
Note: In Assignment 1, the assumption was that the market structure [or selling environment] was perfectly competitive and that the equilibrium price was to be determined by setting QD equal to QS.
You are now aware of recent changes in the selling environment that suggest an imperfectly competitive market where your firm now has substantial market power in setting its own “optimal” price.
2. Given that business operations have changed from the market structure specified in the original scenario in the first Assignment, determine two (2) likely factors that might have caused the change. Predict the primary manner in which this change would likely impact business operations in the new market environment.
3. Analyze the major short run and long cost functions for the low-calorie, frozen microwaveable food company given the cost functions below. Suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.
TC = 160,000,000 + 100Q + 0.0063212Q2
VC = 100Q + 0.0063212Q2
MC= 100 + 0.0126424Q
4. Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumstances. Provide a rationale for your response.
Hint: Your firm’s price must cover average variable costs in the short run and average total costs in the long run to continue operations.
5. Suggest one (1) pricing policy that will enable your low-calorie, frozen microwavable food company to maximize profits. Provide a rationale for your suggestion.
Hints: In first Assignment, you determined your firm’s market demand equation. Now you need to find the inverse demand equation. Having found that, find the Total Revenue function for your firm (TR is P x Q). From your firm’s Total Revenue function, then find your Marginal Revenue (MR) function.
Use the profit maximization rule MR = MC to determine your optimal price and optimal output level now that you have market power. Compare these values with the values you generated in Assignment 1. Determine whether your price higher is or lower.
6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.
Hints: Calculate profit in the short run by using the price and output levels you generated in part 5. Optional: You may want to compare this to what profit would have been in Assignment 1 using the cost function provided here.
Calculate profit in the long run by using the output level you generated in part 5 and cost data in part 3 and assuming that the selling environment will likely be very competitive. Determine why this would be a valid assumption.
7. Recommend two (2) actions that the company could take in order to improve its profitability and deliver more value to its stakeholders. Outline, in brief, a plan to implement your recommendations.
8. Use at least five (5) quality academic resources in this assignment.
Note: Wikipedia does not qualify as an academic resource
The assignment must follow these formatting requirements:
· Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format.
· Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
· Analyze short-run and long-run production and cost functions.
· Apply macroeconomic concepts to changes in global and national economies and how they affect economic growth, inflation, interest rates, and wage rates.
· Evaluate the profit-maximizing price and output level for given operating costs for monopolies and firms in competitive industries.
· Use technology and information resources to research issues in managerial economics and globalization.
· Write clearly and concisely about managerial economics and globalization using proper writing mechanics.
Assignment 3_Long-Term Investment Decisions
Due: 09 February, 2018 by 6:00pm EST
Assume that the low-calorie frozen, microwavable food company from Assignments 1 and 2 wants to expand, and has to make some long-term capital budgeting decisions.
The company is currently facing increases in the costs of major ingredients.
Use the Internet to research government policies and regulation.
Write a six to eight (6-8) page paper in which you:
1. Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products’ response to a change in price less elastic. Provide a rationale for your response.
2. Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.
3. Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response.
4. Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.
5. Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.
6. Use at least six (6) quality academic resources in this assignment, also cited in paper.
Note: Wikipedia does not qualify as an academic resource.
Your assignment must follow these formatting requirements:
· Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
· Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
· Propose how differences in demand and elasticity lead managers to develop various pricing strategies.
· Analyze the economic impact of contracting, governance and organizational form within organizations.
· Use technology and information resources to research issues in managerial economics and globalization.
· Write clearly and concisely about managerial economics and globalization using proper writing mechanics.
