Reference no: EM13926544
The following is a full-blown demand equation for pizza.
- QD = - 200P + 1.5Phd - 5Psd + 20A + 15Pop
- P = Price of pizza
- Phd = Price of hot dogs ($2.00, use 200 cents)
- Psd = Price of soft drink ($1.50, use 150 cents)
- A = Advertising 40 ($40,000, use 40)
- Pop = Percentage of population for pizza, 70%, using 70
a. Interpret all the coefficients in the above demand equation and then find the reduced demand equation, Q in terms of P only assuming the above values of non-price determinants. What does the constant term in this reduced demand equation (Q in terms of P only) represent?
b. At a price of $5, what is price elasticity? Based upon the price elasticity you got at P = $5.00, is it better to reduce price or raise price and why or why not?
c. How far further down from the current price of $5.00 could you reduce the price without hurting revenue? (i.e., MR should not be negative). Find that price level and then express this price reduction in percentage using $5.00 as base.
d. Compute the cross elasticity between hot dog/pizza as well as soft drink/pizza using Q you found in (b) and interpret the results.
e. If price is reduced further from $5.00 by the percentage you got in (c), compute the impact of this further price reduction on soft drink and hot dog using the cross elasticity figures you got in (d) and interpret the results. You may consider soft drink may include alcoholic drink such as beer/wine.
f. Is it a good idea to reduce price further based upon your answer (e)? Why or why not?
g. With the advertising budget of $40,000 (use 40), calculate the elasticity of advertising using Q you obtained in (b)? Interpret the result. What would happen to a constant term in a new reduced demand equation as a result an increase in advertising budget?
h. Due to the health consciousness on the part of the population concerned, there is 10% drop (use 10) in the pizza population from 70%. What would be its impact on the demand?
i. How much would the advertising expenditure have to be increased to compensate for the drop in population?
j. Do you think the above increase in the advertising expenditure is worthwhile or not? Provide number for your argument.
|
Chi-square goodness of fit test
: Repeat the above procedure using only Brands A, B, and D. Paste results here.
|
|
What alternatives are available to the failing firm
: What alternatives are available to the failing firm? Basically, what determines whether a bankrupt company is reorganized or liquidated?
|
|
Examination of effects that war and peace
: Use the Internet to research one (1) developing nation of your choice. Your research should include an examination of the effects that war and peace have on the distribution of foreign aid, as well as the material covered by the Webtext and lectur..
|
|
Shrm code of ethical and professional standards
: Watch the video titled, "The Importance of Business Ethics" located below. Next, go to the Society for Human Resource Managers' (SHRM) Website and read the "SHRM Code of Ethical and Professional Standards in Human Resources Management," located at..
|
|
Full-blown demand equation for pizza
: The following is a full-blown demand equation for pizza.
|
|
Technical developments at gumby polymer rubber
: Missy Knowles is in charge of all technical developments at Gumby Polymer Rubber. She makes all the choices concerning product innovations in the company. She finds that she is overworked and that several of her research chemists seem to be spendi..
|
|
Contracts and crafting certain governance structures
: Which of the following is a theory that recognizes that firms have relationships with many constituent groups which both affect and are affected by the actions of the firm?
|
|
What does multimodality mean
: Which typeface would be inappropriate to use on a printed funeral program: Comic Sans MS or Garamond? What does multimodality mean?
|
|
Mean of the specific probability distribution
: A police department reports that the probabilities that 0, 1, 2, and 3 burglaries will be reported in a given day are 0.49, 0.42, 0.06 and 0.03, respectively. What is the mean of the given probability distribution?
|