Calculate the equilibrium price and quantity

Assignment Help Econometrics
Reference no: EM131145699

1. Assignment: Demand Estimation

2. 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.

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

4. 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 + 0.20A + 0.25M

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

R2 = 0.55 n = 26 F = 4.88

5. Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables:

6. 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

7. Option 2

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

8. QD = -2,000 - 100P + 15A + 25PX + 10I

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

R2 = 0.85 n = 120 F = 35.25

9. Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables:

10. 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

11. Write a four to six page paper in which you:

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

13. 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.

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

15. 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 cents.

a. Plot the demand curve for the firm.
b. Plot the corresponding supply curve on the same graph using the following MC / supply function Q = -7909.89 + 79.1P with the same prices.
c. Determine the equilibrium price and quantity.
d. Outline the significant factors that could cause changes in supply and demand for the low-calorie, frozen microwavable food. 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.

16. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves for the low-calorie, frozen microwavable food.

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

18. Your assignment must follow these formatting requirements:

19. 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 required assignment page length.

1. The specific course learning outcomes associated with this assignment are:

2. 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.

Reference no: EM131145699

Questions Cloud

Define the first step of research in your own words : Identify the major assumptions and bias of the drug industry that underlie drug research. Identify the personal bias that you, as a consumer, have on the drug industry's influence over research.
Dorfner company recognizes revenue at the end : For each situation, list the assumption, principle, or constraint that has been violated, if any. Some of these assumptions, principles, and constraints were presented in earlier chapters. List only one answer for each situation.
Compute the expected present discounted value : For which of the problems listed in (a) through (c) would you want to use real payments and real interest rates, and for which would you want to use nominal payments and nominal interest rates to compute the expected present discounted value? In e..
What factors would lead to designation in either category : Describe what factors would lead to designation in either category and explain how this relationship influences economic interaction and political relations at the supranational level. In other words, does the European Union treat countries of the..
Calculate the equilibrium price and quantity : Determine the equilibrium price and quantity. 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.
Identify by number the accounting assumption : Identify by number the accounting assumption, principle, or constraint that describes each situation below. Do not use a number more than once.
Can the nominal interest rate ever be negative : Can the real interest rate ever be negative? Under what circumstances can it be negative? If so, why not just hold cash instead of bonds?
Explain the rationale for the strategy in detail : Craft a brief (1-2 pages) strategy for a business concept that would directly compete with the small business you selected. Explain the rationale for the strategy in detail
How tosca exploits these ideas within the opera : ESSAY: Link Government censorship, nationalistic music and Romantic Period music stars with the popularity and influence of opera, and how " Tosca" exploits these ideas within the opera.

Reviews

Write a Review

Econometrics Questions & Answers

  Design a simple econometric research project

Design a simple econometric research project

  Multiplicative decomposition method

Multiplicative decomposition method

  Market for cigarettes

The Australian government administers two programs that affect the market for cigarettes.

  Solve the forecast model

Solve the forecast model

  What are the marginal abatement cost functions

What are the marginal abatement cost functions for each of the two areas? Calculate the loss in the two areas due to over-control (for the rural area) and under-control (for the urban area).

  Write the t statistic for testing the null hypothesis

Explain why this model violates the assumption of no perfect collinearity.  Write the t statistic for testing the null hypothesis

  What is economics system

What is economics system? What are the types of economics system? Briefly explain each type of economics system by giving examples of nations that are close to each type

  Multiple choice questions related to market concentration

Determine when a competitively produced product generates negative externalities in production, the industry will,

  Calculating number of units produced by firm

Assume a company has the following production function: Q = 100 K.5 L1 . Currently, the company hires 1,000 workers and employs 100 units of capital.

  Question about mobile commerce

M-commerce also known as mobile commerce is being lumped in with several strategic internet plans. Explain some of the industries that are likely to use mobile commerce and how it is working for them.

  Calculating the average days past due and average flow time

Auto Data manufactures custom engineering testing machine. The following 5-orders are currently in the design department:

  Mechanism of an english auction and second price auction

Briefly discuss the difference between mechanism of an oral or English auction and a Vickrey or second price auction.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd