Instruction: You should prepare the case with your group members. Each group is required to submit a word file detailing your analysis. You will be graded on your group’s performance and your contribution to your group.

Summary of the case:
You work for Price Waterman Coopers as a market analyst. PWC has been hired by the owner of two Burger King restaurants located in a suburban Atlanta market area to study the demand for its basic hamburger meal package–referred to as “Combination 1" on its menus. The two restaurants face competition in the Atlanta suburb from five other hamburger restaurants (three MacDonald’s and two Wendy’s restaurants) and three other restaurants serving “drive-through” fast food (a Taco Bell, a Kentucky Fried Chicken, and a small family-owned Chinese restaurant).

The owner of the two Burger King restaurants provides PWC with the data shown in Table 1 (Table 1 is in a separate excel file). Q is the total number of Combination 1 meals sold at both locations during each week in 1998. P is the average price charged for a Combination 1 meal at the two locations. [Prices are identical at the two Burger King locations.] Every week the Burger King owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. A is the dollar amount spent on newspaper ads for each week in 1998. The owner could not provide PWC with data on prices charged by other competing restaurants during 1998. For the one-year time period of the study, household income and population in the suburb did not change enough to warrant inclusion in the demand analysis.

a) Using the data in Table 1, specify a linear functional form for the demand for Combination 1 meals, and run a regression to estimate the demand for Combo 1 meals.

b) Using statistical software, estimate the parameters of the empirical demand function specified in part a. Write your estimated demand...

...ECO 740
CASE EXERCISE
SOFT DRINK DEMANDESTIMATION
PREPARED BY
GROUP
:NIK NORMIE EDAYU BT. HJ. NIK HIM
: BM 770 (evening track)
MATRIX NO. : 2011913361
SUBMITTED TO
: DR. AZLINA BT. HANIFF
Demand can be estimated with experimental data, time-series data, or cross-section
data. Sara Lee Corporation generates experimental data in test stores where the
effect of an NFL-licensed Carolina Panthers logo on Champion sweatshirt sales can be
carefully examined. Demand forecasts usually rely on time-series data. In contrast,
cross-section data is appear in Table 1. Soft drink consumption in cans per capita per
year is related to six-pack price, income per capita, and mean temperature across the
48 contiguous in the United States.
Table 1
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montan
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Cans/Capita 6-Pack $
Income
/Yr
Price
$/Capita
200
2.19
150
1.99
237
1.93
135
2.59
121
2.29
118
2.49
217
1.99
242
2.29
295
1.89
85
2.39
114
2.35
184
2.19
104
2.21
143
2.17
230
2.05
269
1.97
111
2.19
217
2.11
114
2.29
108
2.25
108
2.31
248
1.98
203
1.94
77...

...TUTORIAL 1: DEMAND THEORY
1a)
The demand curve for haircuts at Terry Bernard’s Hair Design is P = 15 – 0.15Q where Q is the number of cuts per week and P is the price of a haircut. Terry is considering raising her price above the current price of RM9. Terry is unwilling to raise price of the price hike will cause revenue to fall. Should Terry raise the price of haircuts above RM9? Why or why not?
b)
Terry is trying to decide on the number of people to employ based on the following short-run production function:
Q = 12L – 0.5L2
Where Q is the number of cuts per week and L is the number of workers. Suppose the price of a haircut is RM9, how many people should be hired if she pays each worker RM60 per week.
2. Based on a consulting economist report, the demand function for Formula 1 stickers by two individuals, (assuming the market has only 2 individuals)
Q1 = 16 - 4P Q2 = 20 –2P respectively
a. What is the market demand curve equation? Write it in the conventional way.
b. Given the total cost as TC = 2 + 0.9Q2. Calculate the profit maximizing quantity and price and the total profits.
c. Draw a diagram showing the equilibrium situation in (b).
3. The market demand and supply functions for a consumer item are as follow:
Qd = 120 – 6P
Qs = 20 +4P
a) Determine the equilibrium price and quantity....

...empirical demand function—both linear and nonlinear functional forms.
For price-setting firms with market power, you will learn to how to use least-squares
regression methodology to estimate a firm’s demand function.
Forecast sales and prices using time-series regression analysis.
Employ dummy variables to account for cyclical or seasonal variation in sales.
Discuss and explain several important problems that arise when using statistical
methods to forecast demand.
Essential Concepts
1.
Empirical demand functions are demand equations derived from actual market
data. Empirical demand functions are extremely useful in making pricing and
production decisions.
2.
In linear form, an empirical demand function can be specified as
Q = a + bP + cM + dPR
where Q is the quantity demanded, P is the price of the good or service, M is
consumer income, and PR is the price of some related good R.
In the linear form, b = ΔQ / ΔP , c = ΔQ / ΔM , and d = ΔQ / ΔPR . The expected
signs of the coefficients are: (1) b is expected to be negative, (2) if good X is
normal (inferior), c is expected to be positive (negative), (3) if related good R is a
substitute (complement), d is expected to be positive (negative).
The estimated elasticities of demand are computed as
ˆ ˆP
E=b
Q
3.
M
ˆ
ˆ
EM = c
Q
ˆP
ˆ
E XR = d R
Q
When...

...
DemandEstimation
Seydou Diallo
Strayer University
ECO 550: Managerial Economics
Dr. Fereidoon Shahrokh
November 4, 2014
Background
I work for Snack-Eeze. We are the leading brand of low-calorie, frozen microwavable food. We estimate the following demand equation for our product using the data from 26 supermarkets around the country for the month of April.
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
Compute the elasticities for each independent variable. Note: Write down all of your calculations.
McGuigan, Moyer, and Harris state that elasticity is merely a ratio of the percentage change in quantity to the percentage change in a determinant (2013). Therefore, we will use the following formula.
The formula for finding price...

...
DemandEstimation
ECO 550: Managerial Economics and Globalization
/2015
Jason M Brown
1. Compute the elasticity for each independent variable.
When P=500 Px-600 I=$5,500 A=$10,000 and M=5,000, using the regression equation:
QD = -5,200 -4,200(500) +5.2(600) +5.2(5,500) +0.20) (10,000) +0.25(5,000) =17,650
Price Elasticity = (P/Q) (∆Q/∆P)
From the regression equation: ∆Q/∆P=-42
So price elasticity (EP) = (p/Q) (-42) (500/17650) =-1.19
Ec=20(600/17650) =0.68
EA= (P/Q) (0 .20) (10,000/17,650) =0.11
EI= (P/Q) (5.2) (5,500/17,650) = 1.62
EM= (P/Q) (0.25) (5,000/17,650) =0.07
2. Determine the implications for each of the computed elasticity for the business in terms of short term and long-term pricing strategies. Provide a rationale in which you cite your results.
Price Elasticity is -1.19. That is a 1% increase in price of the product will make quantity demanded to drop by 1.19%. Thus, the demand for this product is somewhat elastic. Consequently, increase in income may drive consumers away.
Cross-price elasticity is 0.68 that is if the price of the competitor’s product goes up by 1% then quantity demanded of this product will increase by 0.68%. This product is fairly inelastic to a competitor’s price and there exist no need to be concerned about the competitor since their pricing won’t affect sales.
Income-elasticity is 1.62. This indicates that a 1% rise in the average area income will boost the quantity demanded by...

...
DemandEstimation
Dhruvang kansara
Eco 550, Assignment 1
Professor: Dr, Guerman Kornilov
January 27, 2014
1. Compute the elasticity for each independent variable. Note: Write down all of your calculations.
According to our Textbooks and given information, When P = 8000, A = 64, PX = 9000, I = 5000, we can use regression equation,
QD = 20000 - 10*8000 + 1500*64 + 5*9000 + 10*5000 = 131,000
Price elasticity = (P/Q)*(dQ/dP)
From regression equation, dQ/dP = -10.
So, price elasticity EP= (P/Q) * (-10) = (-10) * (8000 / 131000) = -0.61
Similarly,
EA = 1500 * 64 / 131000 = 0.73
EPX = 5 * 9000 / 131000 = 0.34
EI = 10* 5000 / 131000 = 0.38
2. 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.
Price elasticity is -0.61 which means a 1% increase in price of the product causes quantity demanded to drop by 0.61%. So, the demand of the product is relatively inelastic. Therefore, increase in price may not have large impact on the customers.
Advertisement elasticity is 0.73, meaning 1% increase in advertising expenses increases quantity demanded by only 0.73%. So, demand is relatively inelastic to advertising. Therefore, more advertisement won’t necessarily mean that firm can raise the price because it still could drive customers...

...MANGERIAL ECONOMICS
Assignment
DemandEstimation
04-Dec-12
Liaqat Group
Submitted To:
Prof. Babar Hussain
What Is DemandEstimation?
When running a small business, it is important to have an idea of what you should expect in the way of sales. To estimate how many sales a company will make, demandestimation is a process that is commonly used. Withdemandestimation, a company can gauge how much to produce and make other important decisions.
Definition:
Demandestimation is a process that involves coming up with an estimate of the amount of demand for a product or service. The estimate of demand is typically confined to a particular period of time, such as a month, quarter or year. While this is definitely not a way to predict the future for your business, it can be used to come up with fairly accurate estimates if the assumptions made are correct.
Methods of DemandEstimation:
There are a variety of ways that can be used to estimate demand, each of which has certain advantages and disadvantages. They are divided into Qualitative and Quantitative Methods.
Qualitative Methods:
Qualitative methods consists of following points.
Consumer surveys:...

...
DemandEstimationDemand Curve Estimation
■ Simple Linear Demand Curves
■ The best estimation method balances marginal costs and marginal benefits.
■ Simple linear relations are useful for demandestimation.
■ Using Simple Linear Demand Curves
■ Straight-line relations give useful approximations.
Identification Problem
■ Changing Nature of Demand Relations
■ Demand relations are dynamic.
■ Interplay of Supply and Demand
■ Economic conditions affect demand and supply.
■ Shifts in Demand and Supply
■ Curve shifts can be estimated.
Simultaneous Relations
[pic]
Interview and Experimental Methods
■ Consumer Interviews
■ Interviews can solicit useful information when market data is scarce.
■ Interview opinions often differ from actual market transaction data.
■ Market Experiments
■ Controlled experiments can generate useful insight.
Experiments can become expensive
Regression Analysis
■ What Is a Statistical Relation?
■ A statistical relation exists when averages are related.
■ A deterministic relation is true by definition.
■ Specifying the Regression Model
■ Dependent variable Y is caused by X.
■ X...

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