A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35Pm + 0.2Pc The variables and their assumed values are Q = Quantity P = Price of basic model = 7,000 A = Advertising expenditures (in thousands) = 52 Ppc = Average price of a personal computer = 4,000 Pm = Average price of a minicomputer = 15,000 Pc = Average price of a leading competitor’s workstation = 8,000 Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm’s marketing and pricing policies?
A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following
Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35Pm + 0.2Pc
The variables and their assumed values are
Q = Quantity
P =
A = Advertising expenditures (in thousands) = 52
Ppc = Average price of a personal computer = 4,000
Pm = Average price of a minicomputer = 15,000
Pc = Average price of a leading competitor’s workstation = 8,000
Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm’s marketing and pricing policies?
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