A manufacturer of computer workstations gathered average monthly sales figures from its 56branch offices and dealerships across the country and estimated the following demand for itsproduct:Q = +15,000 - 2.80OP + 150A + 0.3Ppc + 0.35PM + 0.2PcThe variables and their assumed values areQ= QuantityP= Price of basic model = 7,000A = Advertising expenditures (in thousands) = 52Pae = Average price of a personal computer = 4,000Pm = Average price of a minicomputer = 15,000Pe = Average price of a leading competitor's workstation = 8,000Compute the elasticities for each variable. On this basis, discuss the relative impact that eachvariable has on the demand. What implications do these results have for the firm's marketing andpricing policies?

We are going to calculate elasticities to answer this question.

A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35PM + 0.2Pc The variables and their assumed values are Q= Quantity P= Price of basic model = 7,000 A= Advertising expenditures (in thousands) = 52 Pre = Average price of a personal computer = 4,000 Pm = Average price of a minicomputer = 15,000 Pe = Average price of a leading competitor's workstation = 8,000 Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies?

A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35PM + 0.2Pc The variables and their assumed values are Q= Quantity P= Price of basic model = 7,000 A= Advertising expenditures (in thousands) = 52 Pre = Average price of a personal computer = 4,000 Pm = Average price of a minicomputer = 15,000 Pe = Average price of a leading competitor's workstation = 8,000 Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

ChapterB: Differential Calculus Techniques In Management

Section: Chapter Questions

Problem 8E

See similar textbooks

Similar questions

I- Demand for a product is estimated to be Q=960 - 1.2P + 1.4Y +.003A where, Q and P are the quantity and price of the product respectively, Y is income, and A is the advertising expenditures. All the variables are in the natural logarithmic form and all the estimated coefficients are statistically significant. The average annual sale and the average price of the product are 60000 units and $8000 respectively. A. Price elasticity of demand is -------------, income elasticity of demand is ---------, advertising elasticity of demand is B. The optimum level of advertising spending for the firm is
A large company in the communication and publishing industry hs quantified the relationship between the price of one of its products and the demand for this product as Price = 160 -0.01 xDemand for an annual printing of this particular product. The foxed costs per year (ie. per printing) = $4T 000 and the variable cost per unit = $35. What is the maximum profit that can be achieved? What is the unit price at this point of optimal demand? Demand is not expected to be more than 7,000 units per year. The maximum profit that can be achieved is S. (Round to the nearest dolar.) The unit price at the point of optimal demand is S per unit (Round to the nearest cent)
potter makes and sells ceramic bowls. It is observed that when the price is $32, only 9 bowls are sold in a week; but when the price decreases to $10, weekly sales rise to 20. Assuming that demand can be modelled by a linear function, (a) obtain a formula for Pin terms of Q (b) Calculate for the slope of the curve if the relationship between p and Q is linear. (c) comment on the likely reliability of the model
Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for its product using data from 25 retail stores around Dover city for the month of November: Q=-2000-15 Pje+ 8.4Px + 0.51 + 0.4A (220) (5.0) (5.6) (0.2) (0.16) R²=0.57 n=25 F = 6.83 Assume the following values for the independent variables: Standard error 1 Q denotes quantity sold per month Pje (denotes price of the bottled juice) = 240 (in cents) P. (denotes price of leading competitor's product) - 300 (in cents) I (denotes per capita income of the standard residential district in which the retail store is located) = 4000 (in dollars) A (denotes monthly advertising expenditure) = 7700 (in dollars) Using this information, answer the following questions: a. Compute elasticities for each variable.. b. Do you think that this firm should cut its price to increase its market share?
Q2 The manufacturer of a low-sugar bottled juice estimated the following demand equation for its product using data from 25 retail stores around Dover city for the month of November: Q=-2000-15 Pje+ 8.4Px + 0.51 + 0.4A (220) (5.0) (5.6) (0.2) (0.16) R²=0.57 n=25 F = 6.83 Assume the following values for the independent variables: Standard error 1 Q denotes quantity sold per month Pje (denotes price of the bottled juice) = 240 (in cents) P. (denotes price of leading competitor's product) - 300 (in cents) I (denotes per capita income of the standard residential district in which the retail store is located) = 4000 (in dollars) A (denotes monthly advertising expenditure) = 7700 (in dollars) Using this information, answer the following questions: a. Compute elasticities for each variable.. b. Do you think that this firm should cut its price to increase its market share? Explain..
Q1. A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships and estimated the following demand for its product: Q= 15000 – 2.8P + 150A + 0.3 Ppc + 0.35 Pm + 0.2Рс (5.234) (1.29) (175) (0.12) (0.17) (0.13) R^2 = 0.68 Numbers in brackets are standard error of coefficient (SEC) t statistics = b^/SEC Q= Quantity P = Price of basic model=7000 A= Advertising expenditures (in thousands) = 52 Ppc = Average price of a personal computer = 4000 Pm= Average price of a minicomputer = 15000 Pc= Average price of a leading competitor's workstation = 8000 a. Compute the elasticities for each variable. b. Conduct a t-test for the statistical significance of each variable. c. Discuss the results of the t-tests in light of the policy implications mentioned.
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. Note: 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 units P (in cents) = Price of the product = 500 cents per 3-pack unit PX (in cents) = Price of leading competitor's product = 600 cents per 3-pack unit I (in dollars) = Per capita income of the standard metropolitan statistical area (SMSA) in…
Subpart Letter D and E to be solved 1. Consider the following: If the price per unit of good A is P200 quantity purchased isvalued at 1,500 units. If price changes (increase or decrease) by P1, quantity demandedchanges (decreases or increases) by 4 units.A. Determine the demand function expressed as a price function. B. Set up a demand schedule for this function and determine the price elasticity ofdemand at various P and Qd combinations using point-price elasticity formula.(Make sure that all elasticity concepts are found on the same demand curve.) C. Determine the TR and MR functions.D. Graph the demand curve and the TR curve (TR curve just below the demand curve)E. At what P and Qd combination will TR be maximum?
The multivariate demand function below will be needed for questions 12-18. Setting: Grapple, Inc. is a leading seller of laptop personal computers. However, they want to become a leading tablet seller, too. Your marketing department, aided by your economics staff, has estimated a function to help you in the quest for market leader in tablets. The variables are defined after the function. Qg = 10000 - 25Pg + 20Ph + 30Pr - 15dv - 35Psc - 10Pmm + 0.05Ag + 0.03A -25C + 0.1Y Qg = the number of Grapple tablet computers demanded per week. Pg = the price of each new Grapple tablet (in $). Ph = the price of each Hewpaq tablet (in $). Pr = the price of each Ronova tablet. Pdv = the price to equip a tablet with Holographic digital video (in $, this is an upgrade option that enables three-dimensional graphics on a tablet. Two-dimensional graphics is standard equipment). Psc = the price of various screen sizes (in $, a 8 inch is standard, but upgrade options are 10…
Subpart to be solved 1. Consider the following: If the price per unit of good A is P200 quantity purchased isvalued at 1,500 units. If price changes (increase or decrease) by P1, quantity demandedchanges (decreases or increases) by 4 units.A. Determine the demand function expressed as a price function. B. Set up a demand schedule for this function and determine the price elasticity ofdemand at various P and Qd combinations using point-price elasticity formula.(Make sure that all elasticity concepts are found on the same demand curve.) C. Determine the TR and MR functions.D. Graph the demand curve and the TR curve (TR curve just below the demand curve)E. At what P and Qd combination will TR be maximum?
A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q = +15,000 - 2.80P + 150A + 0.3Ppc + 0.35Pm + 0.2Pc The variables and their assumed values are Q = Quantity P = Price of basic model = 7,000 A = Advertising expenditures (in thousands) = 52 Ppc = Average price of a personal computer = 4,000 Pm = Average price of a minicomputer = 15,000 Pc = Average price of a leading competitor’s workstation = 8,000 Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm’s marketing and pricing policies?
A student prepared the following spreadsheet model to calculate the final price of clothing items which are sold at a discount. To be complete, the student included a calculation of sales tax in the final price, given the original price (180), discount (0.2), and sales tax rate (0.09) shown below. A B 1 2 Original Price 180 3 Discount(%) 0.2 4 Discount ($) = B2 × B3 5 Net Price = B2 − B4 6 Sales Tax(%) 0.09 7 Sales Tax($) = ROUND(B5 × B6,2) 8 Final Price = ROUND(B5 + B7,2) Determine what values the spreadsheet should display. (Round your answer to 2 decimal places.)