Team 20 | MANAGIRAL ECONOMICS PROJECT 1 | Estimation of the Demand for Combo 1 meals | | Corey Siragusa 106549438 | Yujing Zhang 108672624 | Gary Zhao 108693441 | 11/7/2012 |
a) Using the data in Table 1, specify a linear functional form for the demand for Combination 1 meals, and run a regression to estimate the demand for Combo 1 meals.
According to the passage, we know that the Quantity of meals sold by Combination (Q) is related to the average price charged (P) and the dollar amount spent on newspaper ads for each week in 1998(A). The price will influence the quantity of demand with inverse relation, and ads may lead to change of demand with positive relation.
Household income and population in the suburb did
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We can have strong confident to conclude that P and A variable has some correlation with Q.
However, the Adjusted R-square equals to 0.2337, which is not every large. That is to say, P and A are able to explain only 23.37% changes of quantity of demand.
d) Discuss how the estimation of demand might be improved.
From Part C, we find that the adjusted R-square is not very high. So we should increase the adjusted R-square by increasing number of variables. We believe that the estimation of demand might be improved, if we can collect more information about competitors, including their price, advertising, product improvement, etc. And the population of tourists can be consideration, even though the permanent population didn’t change obviously.
e) Using your estimated demand equation, calculate an own-price elasticity and an advertising elasticity. Compute the elasticity values at the sample mean values of the data in Table 1.
Discuss, in quantitative terms, the meaning of each elasticity.
When Mean of P=4, Mean of A=10009, then Qd= 100626.05-16392.65P +1.58A=50869.67
Own-price elasticity =-16392.65*4/50869.67= -1.289 Advertising elasticity=1.58*10009/50869.67=0.3109
The own-price elasticity is -1.289, which means that if the price goes up $1, the quantity will go down 1.289, and the revenue will drop.
The advertising elasticity is 0.3109, which means that if the investment on
Explain the corresponding impact on total revenue for each of the three price ranges identified in part G.
b. (4 pts.) Assume demand elasticity is 1.3 in the $35 - $50 price range. In this range of demand, by what percentage would quantity demanded change if price increases by 9 percent? Show your detailed calculations.
A. The concept of elasticity of demand has played a major role in managerial decision-making. It has greatly helped managers in consideration of whether lowering a price will lead to an increase in demand of a certain product, and if so, to what extent and whether profits would increase as a result of doing so. In this case the concept of demand becomes advantageous in that:
Find the mean, median, SD & IQR for the data in (1) after it has been transformed
Determine how price elasticity of demand affects the decision making of the consumer and of the organization.
Your paper should be between 1750 and 2500 words, in APA format and structured as follows:
Imagine that you have decided to open a small ice cream stand on campus called "Ice-Campusades." You are very excited because you love ice cream (delicious!) and this is a fun way for you to apply your business and economics skills! Here is the first month's scenario--you order the same number (and the same variety) of ice creams each day from the ice cream suppliers, and your ice creams are always marked at $1.50 each. However, you notice that there are days when ice creams remain unsold but other days when there are not enough ice creams for the number of customers.
You could answer this in 2 ways. (1) You could calculate the elasticity in the $15 - $10 range. This is [(100 - 40) / 140] / [(15 - 10) / 25] = [60 / 140] / [5 / 25] = 0.42 / 0.20 = 2.1. Since we have elastic demand in this range we know that to lower the price the total revenue will RISE. or (2) You could simply calculate the total revenue at the two prices -- at $15 total revenue is $15 x 40 = $600, and at $10, total revenue is $10 x 100 = $1000. So obviously total revenue RISES when the price is lowered from $15 to $10.
3. In the accompanying table, assume that the price of ice skates increases from $10 to $20 per pair. Using the midpoint method, calculate the price elasticity of demand for ice skates for hockey
the highest-cost firm in operation breaks even, while the low cost firms will earn profit.
c. Perform a one-factor analysis of variance for the data. Write the table below and interpret the result.
The current economy has hurt many retail businesses. Every month another retail giant closes its doors. Retail stores which we never would have imagined have gone bankrupt. Retail sales have declined greatly. Major cause of this declination is because many people are unemployed and cannot afford to purchase anything. Retailers are forced to discount prices to increase sales, but discounting still hurts margins. Retailers are assuming a very
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