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Assignment – Demand Estimation
Due on or before 19 January, 2018 by 6:00pm
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 1
Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.
QD = – 5200 – 42P + 20PX + 5.2I + 0.20A + 0.25M
(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)
R2 = 0.55 n = 26 F = 4.88
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 = 500 cents per 3-pack unit
PX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack unit
I (in dollars) = Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,500
A (in dollars) = Monthly advertising expenditures = $10,000
M = Number of microwave ovens sold in the SMSA in which the supermarkets are located = 5,000
> 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 four to six (4-6) 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 four (4) 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
–
Demand
Estimation
Due
on
or
before
19
January,
2018
by
6:00pm
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
1
Note:
The
following
is
a
regression
equation.
Standard
errors
are
in
parentheses
for
the
demand
for
widgets.
QD
=
–
5200
–
42P
+
20PX
+
5.2I
+
0.20A
+
0.25M
(2.002)
(17.5)
(6.2)
(2.5)
(0.09)
(0.21)
R2
=
0.55
n
=
26
F
=
4.88
Your
supervisor
has
asked
you
to
compute
the
elasticities
for
each
independent
variable.
Assum
e
the
following
values
for
the
independent
variables:
Q
=
Quantity
demanded
of
3
–
pack
units
P
(in
cents)
=
Price
of
the
product
=
500
cents
per
3
–
pack
unit
PX
(in
cents)
=
Price
of
leading
competitor’s
product
=
600
cents
per
3
–
pack
unit
I
(in
dollars)
=
Per
capita
income
of
the
standard
metropolitan
statistical
area
(SMSA)
in
which
the
supermarkets
are
located
=
$5,500
A
(in
dollars)
=
Monthly
advertising
expenditures
=
$10,000
M
=
Number
of
microwave
ovens
sold
in
the
SMSA
in
which
the
supermarkets
are
located
=
5,000
>
Option
2
Note:
The
following
is
a
regression
equation.
Standard
errors
are
in
parentheses
for
the
demand
for
widgets.
Q
D
=
–
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
ind
ependent
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
st
andar
d
metropolitan
statistical
area
(SMSA)
in
which
the
supermarkets
are
located
=
$5,000
A
(in
dollars)
=
Monthly
advertising
expenditures
=
$640
Assignment – Demand Estimation
Due on or before 19 January, 2018 by 6:00pm
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 1
Note: The following is a regression equation. Standard errors are in parentheses for the
demand for widgets.
QD = – 5200 – 42P + 20PX + 5.2I + 0.20A + 0.25M
(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)
R2 = 0.55 n = 26 F = 4.88
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 = 500 cents per 3-pack unit
PX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack
unit
I (in dollars) = Per capita income of the standard metropolitan statistical area
(SMSA) in which the supermarkets are located = $5,500
A (in dollars) = Monthly advertising expenditures = $10,000
M = Number of microwave ovens sold in the SMSA in which the
supermarkets are located = 5,000
> 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
