Due Week 3 and worth 200 points

Imagine that you work for the maker of a leading brand of low-calorie,
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.

For a refresher on independent and dependent variables, please go to
Sophia’s Website and review the Independent and Dependent Variables
tutorial, located at
http://www.sophia.org/tutorials/independent-and-dependent-variables–3.

Option 1

Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.

QD = – 5200 – 42P + 20PX + 5.2I + .20A + .25M

(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)

R2 = 0.55 n = 26 F = 4.88

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 3-pack units

P (in cents) = Price of the product = 500 cents per 3-pack unit

PX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack unit

I (in dollars) = Per capita income of the standard metropolitan statistical area

(SMSA) in which the supermarkets are located = $5,500

A (in dollars) = Monthly advertising expenditures = $10,000

M = Number of microwave ovens sold in the SMSA in which the

supermarkets are located = 5,000

Option 2

Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.

QD = -2,000 – 100P + 15A + 25PX + 10I

(5,234) (2.29) (525) (1.75) (1.5)

R2 = 0.85 n = 120 F = 35.25

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 3-pack units

P (in cents) = Price of the product = 200 cents per 3-pack unit

PX (in cents) = Price of leading competitor’s product = 300 cents per 3-pack unit

I (in dollars) = Per capita income of the standard metropolitan statistical area

(SMSA) in which the supermarkets are located = $5,000

A (in dollars) = Monthly advertising expenditures = $640

Write a four to six (4-6) page paper in which you:

Compute the elasticities for each independent variable. Note: Write down all of your calculations.

Determine the implications for each of the computed elasticities for the
business in terms of short-term and long-term pricing strategies.
Provide a rationale in which you cite your results.

Recommend whether you believe that this firm should or should not cut
its price to increase its market share. Provide support for your
recommendation.

Assume that all the factors affecting demand in this model remain the
same, but that the price has changed. Further assume that the price
changes are 100, 200, 300, 400, 500, 600 dollars.

Plot the demand curve for the firm.

Plot the corresponding supply curve on the same graph using the
following MC / supply function Q = -7909.89 + 79.0989P with the same
prices.

Determine the equilibrium price and quantity.

Outline the significant factors that could cause changes in supply and
demand for the product. Determine the primary manner in which both the
short-term and the long-term changes in market conditions could impact
the demand for, and the supply, of the product.

Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves.

Use at least three (3) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with
one-inch margins on all sides; citations and references must follow APA
or school-specific format. Check with your professor for any additional
instructions.

Include a cover page containing the title of the assignment, the
student’s name, the professor’s name, the course title, and the date.
The cover page and the reference page are not included in the
requiredassignment page length.

The specific course learning outcomes associated with this assignment are:

Analyze how production and cost functions in the short run and long run affect the strategy of individual firms.

Apply the concepts of supply and demand to determine the impact of
changes in market conditions in the short run and long run, and the
economic impact on a company’s operations.

Use technology and information resources to research issues in managerial economics and globalization.

Write clearly and concisely about managerial economics and globalization using proper writing mechanics. Buy now

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