Posted: June 15th, 2022

Excelsior ECO 550 550 – Managerial Economics Demand Estimation

Economics 550 – Managerial Economics

Demand Estimation

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, located at .sophia.org/tutorials/independent-and-dependent-variables–3″>http://www.sophia.org/tutorials/independent-and-dependent-variables–3.

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
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:
1.
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 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.

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.
Use at
least three (3) quality academic resources in this assignment. Note:
Wikipedia does not qualify as an academic resource.

Your assignment must follow these
formatting requirements:
•
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.
The specific course learning outcomes
associated with this assignment are:
•
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.

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