Demand and Supply Estimation Essay
Assignment 1: Demand and Supply Estimation
Varney Momo Bafalie
Dr. Emmanuel Obi
Managerial Economics and Globalization
April 26, 2014
References
Managerial Economics: Applications, Strategies and Tactics, Mcguigan/Moyer/Harris 13th Edition, 2014
Imagine that you work for the maker of a leading brand of lowcalorie, frozen microwavable food that estimates the following demand equation for their product using data from 26 supermarkets around the country for the month of April.
Option 1:
Note: The following is a regression equation. Standard errors are in parenthesis for the demand of widgets.
QD=  5200  42P + 20Px + 5.2I + 0.20A + 0.25M (2.002) (17.5) (6.2) (2.5) …show more content…
Price Elasticity is – 1.19. That is a 1% increase in price of the product will make quantity demanded to drop by 1.19%. Thus, the demand for this product is somewhat elastic. Consequently, increase in income may drive consumers away.
Cross price elasticity is 0.68 that is if the price of the competitor’s product goes up by 1%, then quantity demanded of this product with increase by 0.68%. This product is fairly inelastic to a competitor’s price and there exists no need to be concerned about the competitor since their pricing won’t affect sales.
Incomeelasticity is 1.62. This indicates that a 1% rise in the average area income will boost the quantity demanded by 1.62%. In this aspect, the product is elastic and the company can make the decision to raise the price if the average income rises.
Advertisementelasticity is 0.11, which means that A 1% increase in advertising expense will raise the quantity demanded by 0.11%. Therefore, demand is rather inelastic to advertising. For that reason, more advertisement doesn’t automatically means a company can raise the price because that still could drive consumers away.
With respect to microwave ovens in the area, elasticity is 0.07, which shows an elevation of 1% in the number of ovens in the area increasing the quantity demanded by a mere 0.07%. Therefore, in this

Supply and Demand
15148 Words  61 Pagesbeen formatted for twosided printing. Please address any queries to: pricesandmarkets@rmit.edu.au Copyright Martin C. Byford (2012). This version compiled on Thursday 6th December, 2012. Contents Using This Volume 1 Introduction to Demand and Supply 1.1 Quiz . . . . . . . . . . . . . . . . . . 1.2 Group Exercise . . . . . . . . . . . . 1.3 Homework Questions . . . . . . . . . 1.4 Homework Solutions . . . . . . . . . 2 Elasticity 2.1 Quiz . . . . . . . . . 2.2 Group Exercise . . . 2.3 Homework…

Supply and Demand and Demand Curve
1832 Words  8 Pagesthere is discrimination against them in other areas of the city. Rents paid are a very high percent of peoples’ incomes. (a) Would the demand for apartments in this area be relatively inelastic or relatively elastic? State why. (b) Would the supply of apartments in this area be relatively inelastic or relatively elastic? State why. 1 (c) Draw the demand and supply curves as you have described them, showing the initial equilibrium price and quantity. Label carefully. (d) Now assume the government…

Supply and Demand
4781 Words  20 Pages1. award: 1.50 out of 2.50 points The demand curve for product X is given by QXd = 500  5PX. a. Find the inverse demand curve. PX = 100  0.2 QXd Instructions: Round your answer to the nearest penny (2 decimal places). b. How much consumer surplus do consumers receive when Px = $45? $91.00 c. How much consumer surplus do consumers receive when Px = $25? $95.00 d. In general, what happens to the level of consumer surplus as the price of a good falls? The level of consumer surplus…

Regression Analysis for Demand Estimation
1065 Words  5 PagesDemand Estimation by Regression Method – Some Statistical Concepts for application ( All the formulae marked in red for remembering. The rest is for your concept) In case of demand estimation working with data on sales and prices for a period of say 10 years may lead to the problem of identification. In such a case the different variables that may have changed over time other than price, may have an impact on demand more rather than price. In order to void this problem of identification what…

Demand Estimation Essay
925 Words  4 PagesDemand Estimation Dhruvang kansara Eco 550, Assignment 1 Professor: Dr, Guerman Kornilov January 27, 2014 1. Compute the elasticity for each independent variable. Note: Write down all of your calculations. According to our Textbooks and given information, When P = 8000, A = 64, PX = 9000, I = 5000, we can use regression equation, QD = 20000  10*8000 + 1500*64 + 5*9000 + 10*5000 = 131,000 Price elasticity = (P/Q)*(dQ/dP) From regression equation,…

Eco Demand Estimation
2642 Words  11 PagesImagine that you work for the maker of a leading brand of lowcalorie, 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. 1. Compute the elasticities for each independent variable. Option 1 Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables: Q = Quantity demanded of 3pack…

Supply and Demand and Demand Curve
2892 Words  12 Pagesrate of 3%? Answer: P = $40/(0.05  0.03) = $40/0.02 = $2,000 Topic 2: Supply and Demand 1) Suppose that the demand for oranges increase. Explain the long run effects of the guiding function of price in this scenario. Answer: In the long run, the higher price of oranges will signal more firms to enter the orange market, as it will seem more profitable than some other markets. As firms enter, supply increases, causing the price to fall relative to the shortrun price and quantity…

Supply and Demand and Demand Curve
1340 Words  6 Pages1. Suppose there are 100 consumers with identical individual demand curves. When the price of a movie ticket is $8, the quantity demanded for each person is 5. When the price is $4, the quantity demanded for each person is 9. Assuming the law of demand holds, which of the following choices is the most likely quantity demanded in the market when the price is $6? Explain and show calculations, While the question asks of the choices given what the quantity demanded will be, there are no choices…

Demand Estimation and Forecasting
5235 Words  21 PagesCHAPTER 1 INTRODUCTION Demand forecasting refers to the prediction or estimation of a future situation under given constraints. Demand Forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions…

Economics/ Demand Estimation
2473 Words  10 PagesAssignment Demand Estimation 04Dec12 Liaqat Group Submitted To: Prof. Babar Hussain What Is Demand Estimation? When running a small business, it is important to have an idea of what you should expect in the way of sales. To estimate how many sales a company will make, demand estimation is a process that is commonly used. With demand estimation, a company can gauge how much to produce and make other important decisions. Definition: Demand estimation is a process…
More about Demand and Supply Estimation Essay

Supply and Demand
15148 Words  61 Pages 
Supply and Demand and Demand Curve
1832 Words  8 Pages 
Supply and Demand
4781 Words  20 Pages 
Regression Analysis for Demand Estimation
1065 Words  5 Pages 
Demand Estimation Essay
925 Words  4 Pages 
Eco Demand Estimation
2642 Words  11 Pages 
Supply and Demand and Demand Curve
2892 Words  12 Pages 
Supply and Demand and Demand Curve
1340 Words  6 Pages 
Demand Estimation and Forecasting
5235 Words  21 Pages 
Economics/ Demand Estimation
2473 Words  10 Pages