Short-term and long-term pricing strategies

Assignment Help Microeconomics

Reference no: EM13731977

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.

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.

Reference no: EM13731977

Questions Cloud

Differences between motivational interviewing techniques : What are some of the similarities and differences between motivational interviewing techniques used in a counseling setting and persuasive techniques used in a business sales setting

Discuss how each ceo has used concentration : Write a 500- to 700-word summary outlining the discussion with your learning team. Discuss whether or not you think the strategies in the videos are sound based on the discussions you have had with your teammates.

What evidence have you seen of the imperatives for change : What evidence have you seen of the imperatives for change, flexibility, and responsiveness faced by today's firms

Advantages to collecting data through participant : What are the advantages and disadvantages to collecting data through participant or systematic social observation

Short-term and long-term pricing strategies : Compute the elasticities for each independent variable. - Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies.

Importance of organizational learning : Evaluate the importance of organizational learning. Provide examples of how learning and change can impact one another. Review several of your peers' posts. Discuss any similar or opposing perspectives you have, with at least two of your peers...

Determine the key strategic differences : Determine the key strategic differences that have impacted the relative success of both Amazon.com and Yahoo.com. Provide two (2) specific examples of such strategic differences to support the response

External factors contributing to an individual resistance : Write a four- to five-page APA formatted paper (excluding the title and reference pages), using a minimum of three scholarly sources in addition to the textbook, analyzing the internal and external factors contributing to an individual's resistanc..

Complete research on temp-to-fulltime and prepare statement : Complete research on temp-to-fulltime and prepare a written statement (3-4 paragraphs) that Work Now can give to applicants so they can better understand this trend

User Account

All Pages