Running head: Demand Estimation

Managerial Economics

Paul Barnett

Dr. Lin

October 28, 2015

Running head: Demand Estimation

Abstract

In this segment we will be exploring Demand, Price, Advertising, Total Revenue, Quality

demand, per capital income, price of competitors, price of product with regression equations and

various graphs indicating various solutions of each indicated or stated with the segment.

In exploring Qd= -5200-42p+20px+5.29I +0.2A+0.25M

Running head: Demand Estimation

P=500

Px=600

I=5500

A=10000

M=5000

Qd=-5200-42(500) +20(600)+5.2(5500)+0.2(10000)+0.25(5000) = 17650 .it is determined that

95% or more can conclude that it is elastic.

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

Secondly, Ep= -42 . 500/17650= -1.19 IEI =1.19 >1 In this solution, it can be

determined that Demand is elastic. EX= 20. 600/17650 =0.68 .Price is down and sales are down

0.68%this is an indication that the firm will face some degree of competition from the leading

competitor.
Running head: Demand Estimation

This conclusion of Luxury Good indicates that the firm’s product is a luxury good and

they should target higher income families vs. lower income families which they would also need

to market its product in the upscale gourmet shop. Ei=5.2.5500/17650 = 1.62 Ei=1.62 > 1

Advertising is up by 1% which is not effective and sales are up by 0.11%

95% Advertising is up and Sales are up, 95% or more determination that the firm should cut

spending on advertisement.

Ea= 0.20.10000/17650= 0.11

A up 1% Sales up 0.4%

95% of the company’s conclusion that Price should be lowered to increase its market
share.

IEpI =1.19 >1

Demand is elastic – Price is down and TR is up

Assume

Px = 600; I = 5500; A = 10,000; and M = 500

Qd = -5200 -42p + 20(600) + 5.2(5500) + 0.2(10,000) + 0.25(5000)

= -5200 – 42p + 43850

=38650 -42p

Qd = 38650-42p

If P= 100 Qd = 38650 -42(100) =34450

If P = 200 Qd = 38650 -42(200) =30250

If P = 300 Qd = 38650 -42(300) =26050

Running head: Demand Estimation

If P = 400 Qd = 38650 -42(400) =21850

If P = 500 Qd = 38650 -42(500) =17650

If P = 600 Qd = 38650 -42(600) =13450

Qs = -7910 + 79.10p

P = 100 Qs = -7910 + 79.10(100) = 0

P = 200 Qs = -7910 + 79.10(200) = 7910

P = 300 Qs = -7910 + 79.10(300) = 15820

P = 400 Qs = -7910 + 79.10(400) = 23730

P = 500 Qs = -7910 + 79.10(500) = 31640

P = 600 Qs = -7910 + 79.10(600) = 39550

Qd = 38650 – 42p

Qs = -7910 + 79p

Qd = Qs 38650-42p = -7910 + 79p

38650 + 7910 = 42p+79p

46560 = 121p

P= 46560/121 = 384.79 estimated 385

Qe = 38650 – 42(384.79)= 22488.82

Running head: Demand Estimation

Changes in consumer preferences cause the demand curve to shift to the left or right.

However; demand curves are sometimes the result of raw data of actual sales or estimation based on

economic theory or business experience. Long term of a market people are allowed extensive time

before the prices change. In a short term run price is fixed and out can be increased by adding other

variable factors. Some negative factors that will cause a shift of supply and Demand would be a negative

product review that reduce consumer demand for an item, government health warnings regarding an

item. Also. Competition also can cause the demand curve to shift left, as consumers stop buying one

product o purchase a newer, more desirable item.

Running head: Demand Estimation

P Qd Qs

100 34450 0

200 30250 7910

300 26050 15820

400 21850 23730

500 17650 31640

600 13450 39550

Chart Title
700

600

500

400

300

200

100

0
0 5000 10000 15000 References
20000 25000 30000 35000 40000 45000

Demand Supply
Running head: Demand Estimation

McGuigan, J. (2002). Managerial economics: Applications, strategy and tactics (9.th ed.).
Cincinnati,Ohio: South-Western.