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ECO-550 Demand Equation for Assignment 1




Question;The following is the estimated regression equation for;Assignment 1 which quantifies the demand for Widgets (purchased by the case, 10;microwavable entrees per case). Standard errors are in parentheses.;QD = 20,000 - 10P + 1500A + 5PX + 10 I;(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 elasticity?s;for each independent variable, (P, A, PX, and I), in the equation. Assume the;following values for the independent variables;Q D = Quantity demanded;P (in cents) per case = Price of the product = 8000;PX (in cents) = Price of leading competitor?s product = 9000;I (in dollars) = Per capita income of the standard metropolitan;statistical area (SMSA) where the supermarkets are located = 5000;A (in dollars) = Monthly advertising expenditures = 64;Click the link above to submit your assignment.;Assignment 1: Demand Estimation;Due Week 3 and worth 200 points;Imagine that you work for the maker of a leading brand of;low-calorie microwavable food that estimates the following demand equation for;its product using data from 26 supermarkets around the country for the month of;April. (See equation above.);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 1000, 2000, 3000, 4000, 5000, 6000 cents.;1. Plot the demand curve for the firm.;2. Plot the corresponding supply curve on the same graph;using the supply function Q = 5200 + 45P with the same prices.;3. Determine the equilibrium price and quantity.;4. 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.;5. Indicate the crucial factors that could cause rightward;shifts and leftward shifts of the demand and supply curves.;6. Use at least three (3) quality academic resources in this;assignment. Note: Wikipedia does not qualify as an academic resource.


Paper#57662 | Written in 18-Jul-2015

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