Eco550 assignment

Imagine that you work for the maker of a leading brand of low-calorie 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 http://www.sophia.org/tutorials/independent-and-dependent-variables--3.
Note:
data necessary for you to complete this assignment.
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
P (in cents)
=
Price of the product = 500
PX (in cents) =
Price of leading competitor’s product = 600
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

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.
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.
3- Recommend whether you believe that this firm should or should not cut its price to
increase its market share. Provide support for your recommendation.

4Assume 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.
1.1.
Plot the demand curve for the firm.
1.2.
Plot the corresponding supply curve on the same graph using the
supply function Q = 5200 + 45P with the same prices.
1.3.
Determine the equilibrium price and quantity.
1.4.
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.
5Indicate the crucial factors that could cause rightward shifts and leftward shifts of the
demand and supply curves.
Note:
Use at least three (3) quality academic resources in this assignment. Note: Wikipedia does not
qualify as an academic resource.