Essay about Managrial Economics Project

881 Words Oct 29th, 2012 4 Pages
Team 20 | MANAGIRAL ECONOMICS PROJECT 1 | Estimation of the Demand for Combo 1 meals | | Corey Siragusa 106549438 | Yujing Zhang 108672624 | Gary Zhao 108693441 | 11/7/2012 |

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.
According to the passage, we know that the Quantity of meals sold by Combination (Q) is related to the average price charged (P) and the dollar amount spent on newspaper ads for each week in 1998(A). The price will influence the quantity of demand with inverse relation, and ads may lead to change of demand with positive relation.
Household income and population in the suburb did
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Qd= 100626.05-16392.65($4.15) +1.58($18,000) = 61,036.55
61037 Combinations 1 meals are predicted to be sold each week in this situation.

h) If the owner spends $18,000 per week on advertising, write the equation for the inverse demand function. Then, calculate the demand price for 50,000 Combination 1 meals.
Qd= 100626.05-16392.65P +1.58($18,000) = 129,066.05 -16,392.65P
P = F(Q) = 7.8734 – (Q / 16392.65)
P = 7.8734 – (50,000 / 16392.65) = $4.82
The demand price for 50,000 Combination 1 meals is $4.82.
Appendix
SUMMARY OUTPUT | | | | | | | | | | | | Regression Statistics | | | | | Multiple R | 0.513597898 | | | | | R Square | 0.263782801 | | | | | Adjusted R Square | 0.233733119 | | | | | Standard Error | 19176.2901 | | | | | Observations | 52 | | | | | | | | | | | ANOVA | | | | | | | df | SS | MS | F | Significance F | Regression | 2 | 6456033545 | 3228016773 | 8.77822282 | 0.000551628 | Residual | 49 | 18018774997 | 367730102 | | | Total | 51 | 24474808542 | | | | | | | | | | | Coefficients | Standard Error | t Stat | P-value | | Intercept | 100626.0497 | 19216.40273 | 5.23646653 | 3.42163E-06 | | X Variable 1 | -16392.6523 | 5105.3048 | -3.210905703 | 0.002337804 | | X Variable 2 | 1.576333781 | 0.603179309 |

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