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Eco550 assignment




Question;Imagine that you work for the maker of a leading brand of low-calorie microwavable food thatestimates the following demand equation for its product using data from 26 supermarkets aroundthe country for the month of April.For a refresher on independent and dependent variables, please go to Sophia?s Website andreview the Independent and Dependent Variables tutorial, locatedat necessary for you to complete this assignment.The following is a regression equation. Standard errors are in parentheses for the demand forwidgets.QD=- 5200 - 42P + 20PX + 5.2I +.20A +.25M(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)R2 = 0.55n = 26F = 4.88Your supervisor has asked you to compute the elasticities for each independent variable. Assumethe following values for the independent variables:Q=Quantity demandedP (in cents)=Price of the product = 500PX (in cents) =Price of leading competitor?s product = 600I (in dollars)=Per capita income of the standard metropolitan statistical area(SMSA) in which the supermarkets are located = 5,500A (in dollars) =Monthly advertising expenditures = 10,000M=Number of microwave ovens sold in the SMSA in which thesupermarkets are located = 5,000Write a four to six (4-6) page paper in which you:1- Compute the elasticities for each independent variable. Note: Write down all of yourcalculations.2- Determine the implications for each of the computed elasticities for the business in termsof short-term and long-term pricing strategies. Provide a rationale in which you cite yourresults.3- Recommend whether you believe that this firm should or should not cut its price toincrease its market share. Provide support for your recommendation.4Assume that all the factors affecting demand in this model remain the same, but that theprice has changed. Further assume that the price changes are 100, 200, 300, 400, 500, 600dollars.1.1.Plot the demand curve for the firm.1.2.Plot the corresponding supply curve on the same graph using thesupply function Q = 5200 + 45P with the same prices.1.3.Determine the equilibrium price and quantity.1.4.Outline the significant factors that could cause changes in supplyand demand for the product. Determine the primary manner in which boththe short-term and the long-term changes in market conditions couldimpact the demand for, and the supply, of the product.5Indicate the crucial factors that could cause rightward shifts and leftward shifts of thedemand and supply curves.Note:Use at least three (3) quality academic resources in this assignment. Note: Wikipedia does notqualify as an academic resource.


Paper#57801 | Written in 18-Jul-2015

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