Demand Estimation

Option 1QD = – 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 in” rel=”nofollow”>independent variable. Assume the followin” rel=”nofollow”>ing values for the in” rel=”nofollow”>independent variables:

Q = Quantity demanded of 3-pack units
P (in” rel=”nofollow”>in cents) = Price of the product = 500 cents per 3-pack unit
PX (in” rel=”nofollow”>in cents) = Price of leadin” rel=”nofollow”>ing competitor’s product = 600 cents per 3-pack unit
I (in” rel=”nofollow”>in dollars) = Per capita in” rel=”nofollow”>income of the standard metropolitan statistical area
(SMSA) in” rel=”nofollow”>in which the supermarkets are located = $5,500
A (in” rel=”nofollow”>in dollars) = Monthly advertisin” rel=”nofollow”>ing expenditures = $10,000
M = Number of microwave ovens sold in” rel=”nofollow”>in the SMSA in” rel=”nofollow”>in which the supermarkets are located = 5,000

Option 2

.
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 in” rel=”nofollow”>independent variable. Assume the followin” rel=”nofollow”>ing values for the in” rel=”nofollow”>independent variables:

Q = Quantity demanded of 3-pack units
P (in” rel=”nofollow”>in cents) = Price of the product = 200 cents per 3-pack unit
PX (in” rel=”nofollow”>in cents) = Price of leadin” rel=”nofollow”>ing competitor’s product = 300 cents per 3-pack unit
I (in” rel=”nofollow”>in dollars) = Per capita in” rel=”nofollow”>income of the standard metropolitan statistical area
(SMSA) in” rel=”nofollow”>in which the supermarkets are located = $5,000
A (in” rel=”nofollow”>in dollars) = Monthly advertisin” rel=”nofollow”>ing expenditures = $640

Write a four to six (4-6) page paper in” rel=”nofollow”>in which you:
1. Compute the elasticities for each in” rel=”nofollow”>independent variable. Note: Write down all of your calculations.
2. Determin” rel=”nofollow”>ine the implications for each of the computed elasticities for the busin” rel=”nofollow”>iness in” rel=”nofollow”>in terms of short-term and long-term pricin” rel=”nofollow”>ing strategies. Provide a rationale in” rel=”nofollow”>in which you cite your results.
3. Recommend whether you believe that this firm should or should not cut its price to in” rel=”nofollow”>increase its market share. Provide support for your recommendation.
4. Assume that all the factors affectin” rel=”nofollow”>ing demand in” rel=”nofollow”>in this model remain” rel=”nofollow”>in 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 correspondin” rel=”nofollow”>ing supply curve on the same graph usin” rel=”nofollow”>ing the followin” rel=”nofollow”>ing MC / supply function Q = -7909.89 + 79.1P with the same prices.
c. Determin” rel=”nofollow”>ine the equilibrium price and quantity.
d. Outlin” rel=”nofollow”>ine the significant factors that could cause changes in” rel=”nofollow”>in supply and demand for the low-calorie, frozen microwavable food. Determin” rel=”nofollow”>ine the primary manner in” rel=”nofollow”>in which both the short-term and the long-term changes in” rel=”nofollow”>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” rel=”nofollow”>in this assignment. Note: Wikipedia does not qualify as an academic resource.

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