AD has estimated the following demand relationship for its product over the last four years, using monthly observations: ln Qt = 4.932- 1.238 ln Pt + 1.524 ln Yt-1 + 0.4865lnQt-1(2.54) (1.38) (3.65) (2.87)R2= 0.8738where Q = sales in units, P = price in Rs., Y is income in Rs,000, and the numbers in brackets are t-statistics.a. Interpret the above model.b. Make a sales forecast if price is Rs. 9, income last month was Rs. 25,000 and sales last month were 2,981 units.c. Make a sales forecast for the following month if there is no change in price or income.d. If price is increased by 5 per cent in general terms, estimate the effect on sales, stating any assumptions.

AD has estimated the following demand relationship for its product over the last four years, using monthly observations: ln Qt = 4.932- 1.238 ln Pt + 1.524 ln Yt-1 + 0.4865lnQt-1(2.54) (1.38) (3.65) (2.87)R2= 0.8738where Q = sales in units, P = price in Rs., Y is income in Rs,000, and the numbers in brackets are t-statistics.a. Interpret the above model.b. Make a sales forecast if price is Rs. 9, income last month was Rs. 25,000 and sales last month were 2,981 units.c. Make a sales forecast for the following month if there is no change in price or income.d. If price is increased by 5 per cent in general terms, estimate the effect on sales, stating any assumptions.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 8E: Bell Greenhouses has estimated its monthly demand for potting soil to be the following: N=400+4X...

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Bell Greenhouses has estimated its monthly demand for potting soil to be the following: Assume this trend factor is expected to remain stable in the foreseeable future. The following table contains the monthly seasonal adjustment factors, which have been estimated using actual sales data from the past five years: MONTH ADJUSTMENT FACTOR (%) March +2 June +15 August +10 December −12 a. Forecast Bell Greenhouses’ demand for potting soil in March, June, August, and December 2007. Answer b. If the following table shows the forecasted and actual potting soil sales by Bell Greenhouses for April in five different years, determine the seasonal adjustment factor to be used in making an April 2008 forecast. YEAR FORECAST ACTUAL 2007 500 515 2006 452 438 2005 404 420 2004 356 380 2003 308 320
The demand function for Newton’s Donuts has been estimated as follows:Qx = -14 – 54Px + 45Py + 0.62Ax where Qx represents thousands of donuts; Px is the price per donut; Py is the average price per donut of other brands of donuts; and Ax represents thousands of dollars spent on advertising Newton’s Donuts. The current values of the independent variables are Ax=120, Px=0.95, and Py=0.64.Show all of your calculations and processes. Describe your answer for each question in complete sentences, whenever it is necessary. Calculate the price elasticity of demand for Newton’s Donuts and describe what it means. Describe your answer and show your calculations. Derive an expression for the inverse demand curve for Newton’s Donuts. Describe your answer and show your calculations. If the cost of producing Newton’s Donuts is constant at $0.15 per donut, should they reduce the price and thereafter, sell more donuts (assuming profit maximization is the company’s goal)? Should Newton’s Donuts spend…
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Al Shamil Generator Factory is manufacturing three types of generators in the production line for this month:normal units, automatic units and dual units, the selling price of these products reached $ 500, $ 750 and $ 980, respectively, and these products cost raw materials $ 200, $ 300 and $ 400, respectively. Labor costs $ 100, $ 200, $ 250. And the demand for dual units does not exceed 30 units per month. And the normal demand is at least 90 units per month. And the demand for the automatic is 150 units per month at the most. The employment item for this month was $ 850,000.And the item of raw materials is one million dollars. Find the function and the linear model that achieves the lowest cost ??
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As a manager of a small business, you are considering to introduce a new product. The production requires a new machine. You figure out that you could buy it for $190,000, but the price could be in between $180,000 and $200,000. Because of the budget limitation you can only pay 60% of the machine price with your own saving. You will borrow the other 40% with an interest rate around 9% per year (but subject to change in between 8.5% and 10%). The demand of this product is predicted to be 15,000 per year and but could be in between 14800 and 15500. The unit price could be in between $2 and $3, and now you believe that $2.5 is a reasonable price right now. The raw material cost is estimated to be $0.9 but could be in between $0.5 and $1.2. The operation cost of the equipment is around $0.2 for one product but could be in between $0.1 and $0.25. The maintenance cost for this equipment is estimated to be $2000 per year but could be in between $1500 and $2300. Suppose you could always invest…