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##### The maker of a leading brand of low-calorie microwavable food estimates the following demand equatio

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**Question**

he maker of a leading brand of low-calorie microwavable food estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.;Q = - 5200 - 42P + 20PX + 5.2I +.20A +.25M;(2.002) (17.5) (6.2) (2.5) (0.09) (0.21);R2 = 0.55 n = 26 F = 4.88;Assume the following values for the independent variables;Q = Quantity sold per month;P (in cents) = Price of the product = 500;PX (in cents) = Price of leading competitor?s product = 600;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;Using this information, answer the following questions;a. Compute elasticities for each variable.;b. How concerned do you think this company would be about the impact of a recession on its sales? Explain. (Hint: Interpret income elasticity coefficient.);c. Do you think that this firm should cut its price to increase its market share? Explain. (Hint: Refer to the price elasticity of demand.);d. What portion of the variation in sales is explained by the independent variables in the equation? How confident are you about this answer? Explain. (Hint: Interpret R2 and F.);Problem 2;You have the following data for the last 12 months? sales for the PRQ Corporation (in thousands of dollars);January 500 July 610;February 520 August 620;March 520 September 580;April 510 October 550;May 530 November 510;June 580 December 480;a. Calculate a 3-month centered moving average.;b. Use this moving average to forecast sales for January of next year.;c. If you were asked to forecast January and February sales for next year, would you be confident of your forecast using the preceding moving averages? Why or why not?

Paper#18209 | Written in 18-Jul-2015

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