What is the advertising elasticity at the sales price

Assignment Help Econometrics

Reference no: EM13190390

Robinson Plastics makes clear plastic products with injection molding techniques. Their latest invention is a plastic cup with a sharp blade mounted inside to cut prescription pills into small pieces. The cup is placed over the pill and as the cup is pressed down, the pill is split into pieces which are contained inside the cup. Because the cup is above the pill, persons can see how the pill is cut and keep the pieces contained. The presumed market is drugstores who would then sell to customers who want to reduce dosage size.
A survey of local drug manufacturers and retailers suggest that market demand over the next year can be characterized by:
Q = 2,000,000 - 100,000*P + 5*A
Where Q=unit sales, P=price in dollars, and A=advertising expenditure in trade journals and publications.
Robinson is considering a price of either $1 or $2 and an advertising budget of $10,000. Robinson has estimated production cost at $0.75 per unit.
a. Compute the quantity sold and the own price elasticity's at the $1 and $2 sales prices, assuming the stated advertising budget.
b. What is the advertising elasticity at the sales price of $2 assuming the stated advertising budget.
c. How useful is this demand equation for forecasting demand for the pill slicer in the next five years?

Reference no: EM13190390

Questions Cloud

Are gold and silver substitutes or complements : One of their new MBA financial wizards has estimated the following relationship for gold sales in the past year of trading (250 observations): Q = 4,000 - 0.01P + 1.5I - 1.25X + 2.0S R2 = .96 (857) (0.002) (0.65) (0.44) (0.48) where Q = daily sale..

State the same amino acid sequence : Human and chameleon insulins have the same amino acid sequence, with the exception of six amino acids, as shown below. Is the pI of human insulin lower, higher, or the same as that of chameleon insulin?

Find the value of the linear correlation coefficient r : Find the value of the linear correlation coefficient r.

Find the critical values of r given the number of pairs : Suppose you will perform a test to determine whether there is sufficient evidence to support a claim of a linear correlation between two variables. Find the critical values of r given the number of pairs of data n and the significance level alpha.

What is the advertising elasticity at the sales price : The cup is placed over the pill and as the cup is pressed down, the pill is split into pieces which are contained inside the cup. Because the cup is above the pill, persons can see how the pill is cut and keep the pieces contained.

Find the value of the linear correlation coefficient r : Find the value of the linear correlation coefficient r.

Lightbulb is visible light and that the average wavelength : lightbulb is visible light and that the average wavelength og the light is 550 nm, how many photons are emitted by the lightbuld each second?

Determine price of soda pop sold at your stand in dollars : Amalgamated Popcorn, Inc. is a fairly small firm selling bags of flavored gourmet popcorn in a popular mall. As shop owner and operator, you have observed that your daily sales tend to follow a pattern that can be stated as: QP = 500 - 100PP + 1.2..

Find the probability of x successes given the probability : Assume that a procedure yields a binomial distribution with a trial repeated n times. Use the binomial probability formula to find the probability of x successes given the probability p of success on a single trial. Round to three decimal places.

User Account

All Pages