Assignment 1: Demand EstimationDue Week 3 and worth 200 points
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.
Option 1Note: 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 unitsP (in cents) = Price of the product = 500 cents per 3-pack unitPX (in cents) = Price of leading competitor’s product = 600 cents per 3-pack unitI (in dollars) = Per capita income of the standard metropolitan statistical area(SMSA) in which the supermarkets are located = $5,500A (in dollars) = Monthly advertising expenditures = $10,000M = Number of microwave ovens sold in the SMSA in which thesupermarkets are located = 5,000
Write a four to six (4-6) page paper in which you:
Your assignment must follow these formatting requirements:
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