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Economics - Imagine that you work for the maker of a leading




Question;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.Note: The following is a regression equation. Standard errors are in parentheses.QD = -2,000 - 100P + 15A + 25PX + 10Y (5,234) (2.29) (525) (1.75) (1.5 R2 = 0.85 n = 26 F = 35.25Your;supervisor has asked you to compute the elasticities for each;independent variable. Assume the following values for the independent;variables: QD = Quantity demanded of a unit (dependent variable) P (in cents) = 200 cents per unit (price per unit) PX (in cents) = 300 cents per unit (price of leading competitor?s product) Y (in dollars) = $5,000 (per capita income in the Standard Metropolitan Statistical Area (SMSA) where the 26 supermarkets are located) A (in dollars) = $640 (monthly advertising expenditures)1. Compute the elasticities for each independent variable. Note: Write down all of your calculations.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. Plot the demand curve for the firm.;Plot the corresponding supply curve on the same graph using the;following MC / supply function (with the same prices 100, 200, 300, 400;500, and 600 cents):QS = -7909.89 + 79.0989P Determine the equilibrium price and quantity.


Paper#56947 | Written in 18-Jul-2015

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