Demand equations derived from actual market data are a) empirical demand functions. b) never estimated using consumer interviews. c) generally estimated using regression analysis. d) both a and c e) all of the above
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a) empirical demand functions.
b) never estimated using consumer interviews. c) generally estimated using regression analysis. d) both a and c
e) all of the above
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- Agnes, a General Manager in XXX Company, estimated a multiplicative demand function of the form: using a cross-section data collected in the company sales on 30th June, 2019. The estimation results are as follows: (SEE IMAGE) Write down the estimated demand equation Interpret the coefficients and R2 value Describe any three managerial decisions that can be applied by the manager from the estimated demand functionIn the late 90s’ construction slumps and low differentiation have led to significant price competition and margin erosion in the elevator industry. Clear Water Bay, Inc. (CWB) is one of the firms selling elevators to contractors who install elevators for residential buildings. The current market conditions are as follows: Although the real demand for elevators fluctuates each year, it is estimated that on average the total market demand for elevators from residential buildings is 11,000 units per year. There are three segments in this market: Segment A accounts for about 60% of the total demand, Segment B accounts for about 15%, and Segment C accounts for about 25%. Currently, there is fierce price competition in each segment with quite some firms (including CWB). All these competitors are not making much profit and could not reduce prices further in any case. The current market price for one elevator in Segment A is $30,000. The price for one elevator in Segment B is $37,500,…Rubrics : ·Addressing all questions above - ·Demonstrating a clear understanding of the course material and ability to relate the course material to the assignment questions – ·Clarity of expression, good use of language – ·Logical planning, structure and sequence in presenting your findings – ·Overall presentation, including correct grammar, spelling and punctuation – Define the price elasticity of demand and the income elasticity of demand.
- ATV is a price-setting firm and estimates the demand for its cement using a demand function in the linear form: Q = f( P, M, PR) where Qc = demand for cement/month (in yards) Pc = the price of cement per yard, M = country’s tax revenues per capita, and PR = the price of asphalt per yard. DEPENDENT VARIABLE Qc R- SQUARE P- VALUE ON F 64 0.8093 0.0001 INDEPENDENTVARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 8.20 4.01 2.04 0.0461 PC -3.54 1.64 -2.16 0.0357 M 0.64287 0.19 3.38 0.0014 PA 0.7854 0.38 2.07 0.0439 10. Write the resulting regression equation.The company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs per unit are not expected to change over the anticipated changes in volume. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin of Model A. Based on this analysis, should the firm lower the price of Model A? ExplainThe company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs per unit are not expected to change over the anticipated changes in volume. a. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin of Model A. Based on this analysis, should the firm lower the price of Model A? Explain b. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin for the entire line of tennis rackets. c. Based on this analysis, should the firm lower the price of Model A? Explain
- Agnes, a General Manager in XXX Company, estimated a multiplicative demand function of the form: using a cross-section data collected in the company sales on 30th June, 2019. The estimation results are as follows: Constant Price(P) Income (I) Price of other Good (Po) Estimated coefficient 0.022 -0.223 1.354 0.133 Standard Error 0.012 0.056 0.502 0.814 t-statistic (1.19) (-3.98) -2.69 -0.13 Number of Observations, n=210; R-squared= 0.7516 Critical Students t=1.96 at 5% Level of Significance Write down the estimated demand equation Interpret the coefficients and value Describe any three managerial decisions that can be applied by the manager from the estimated demand functionList the chief advantages and shortcomings of using breakeven analysis in pricing decisions. Breakeven analysis is a means of determining the number of goods or services that must be sold at a given price to generate revenue sufficient for covering total costs. It is easily understood by managers and may help them decide whether required sales levels for a certain price are realistic goals. Its shortcomings are as follows. First, the model assumes cost can be divided into fixed and variable categories and ignores the problems of arbitrarily making some allocations. Second, it assumes that per-unit variable costs do not change at different levels of operation, ignoring the possibility of quantity discounts, more efficient use of the workforce, and other possible economies. Third, the basic breakeven model does not consider demand. It is a cost-based model and fails to directly address the crucial question of whether consumers will actually purchase the product at the specified price and…Which three of the following factors are associated with a perfect market? A high degree of mutual interdependency between competing firms B.Transparency of production methods and cost structures No barriers to entry into the market D Strong brand images amnong competing products in the market E The inability of buyers and sellers to influence the market price The following two statements have been made about the accounting and auditing professions (1) Only a member of a CCAB or IFAC body may refer to themselves as an accountant when dealing with clients and members of the public (2) The Financial Reporting Council has statutory powers in relation to the regulatory framework for the auditing profession which have been delegated by the government Are these statements accurate or inaccurate statement (1) Inaccurate; statement (2) Accurate statement (1) Accurate; statement (2) Accurate; statement (1) Inaccurate; statement (2) Inaccurate; statement (1) Accurate; statement (2)…
- 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 local manufacturer is in the process of introducing a new product to all of its retailers. The manufacturer has conducted a survey of consumers, as well as performed trial runs with selected retailers, and discovered the following information about demand for the new product at various price levels: Demand for New Product Quantity Demanded(Number of Units) Price per Unit ($) 300 15 250 25 200 35 150 45 100 55 50 65 0 75 The manufacturer has the following information about how many units they are willing to supply to each retailer at various price levels: Supply for New Product Quantity Supplied(Number of Units) Price per Unit ($) 0 7.50 50 22.50 100 37.50 150 52.50 200 67.50 250 82.50 300 97.50 At what quantity and price will both manufacturer and consumer find equilibrium? And what factors could affect the demand and supply for the new product? When using mathematical concepts to model demand and supply, what parameters must be…A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak demand for the condominiumsThe payoffs, probabilities, and…