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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. Note: The following is a regression equation. Standard errors are in parentheses. QD = -3,750 - 100P + 25A + 50PX + 8Y (5,234) (2.29) (525) (1.75) (1.5) R2 = 0.90 n = 26 F = 35.25 Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables: QD = Quantity demanded of a unit (dependent variable) P (in cents) = 300 cents per unit (price per unit) PX (in cents) = 200 cents per unit (price of leading competitor’s product) Y (in dollars) = $10,000 (per capita income in the Standard Metropolitan Statistical Area (SMSA) where the 26 supermarkets are located) A (in dollars) = $750 (monthly advertising expenditures) Compute the elasticities for each independent variable. 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 prices are 100, 200, 300, 400, 500, 600, 700, and 800 cents. Plot the demand curve for the firm. Plot the corresponding supply curve on the same graph using the following supply function (with the same prices 100, 200, 300, 400, 500, 600, 700, and 800 cents): QS = -7909.89 + 79.0989P Determine the equilibrium price and quantity. (Show this graphically and/or calculate using algebra.) What short-term and long-term changes in market conditions could shift the demand and supply curves for this product?
The market for good X is perfectly competitive. The demand and supply functions of good X are given as follows: Demand: Qd = 6000 – 30 P Supply: Qs = –500 + 20 P Qd is quantity demanded in thousand units, Qs is quantity supplied in thousand units, an..
Silly Sally sells sea shells at the Sea Shore Store. The average and standard deviation of demand during replenishment lead time is 60 and 10?units, respectively. If Sally places an order at the end today when she has 65 units on hand what is the pro..
Given the supply curve for radiographs by a radiology practice, predict how this curve will shift (supply will increase or decrease), if the following occurs which of them will cause a decrease. An increase in the wages of radiological technicians
Assume the economy has a GDP of $11,500 billion. The unemployment rate is at 7.3% and has been slowly rising for the last 6 months. Inflation was at 2.3% one year ago but has since dropped to near 0%. The MPC in the economy is .75 and the natural rat..
The demand for cars in Home is q = 30 – P and the supply of cars in Home is q = P. The demand for cars in Foreign is q = 10 – P and the supply of cars in Foreign is q = P. Calculate the autarky equilibrium price and quantity in each country. Who is t..
Three alternatives are being considered. Alternative A has a useful life of 3 years; Alternative B, 5 years; and Alternative C, 6 years. Using the longest life (LCM) approach, what is the planning horizon?
After that Dewey's opportunity cost of producing one bushel of corn is 1/2 yard of cloth.
A firm's demand curve is given by P = 500 - 2Q. The firm's current price is $300 and the firm sells 100 units of output per week. Calculate the firm's marginal revenue at the current price and quantity using the expression for marginal revenue that u..
Pick Industries produces plastic toothpicks that it sells to distributors in the Southwest. During the early 1990s, the price of the plastic it uses to produce toothpicks fell by 46 percent, due to a local glut of recycled plastic containers. what im..
Refer to the Real Estate data, which reports information of homes sold in the Goodyear, Arizona, area during the last year. Prepare a report on the selling prices of the homes.
Whenever a partnership agreement is silent on this allocation of profits and losses, profit and losses are divided in the same proportion as capital contributions. Whenever a partnership agreement allocated losses in unequal proportions, but is silen..
Suppose you are given the following Total Product Function: Q=100 K^3/2 L^4/2 M^4/7 ,where Q is total output or units produces; K, capital; L, labor; and M, materials.; that is, this is a input factor production function. Find and interpret the outpu..
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