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Running head: DEMAND ESTIMATION

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Demand Estimation
Student name
Instructor Name
Course Name
Date

DEMAND ESTIMATION

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The microwavable low-calorie food manufacturing company is wants to continue with
the excellent performance in the marketplace
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Following are the independent variables:Q = Demanded quantity for 3-pack units
P = Product Price (in cents) of 3-pack units for 500 cents each
PX (in cents) = leading product of competitor’s Price = 3-pack unit for 600 cents each
I = statistical standard metropolitan areas Income Per capita (in dollars)
Supermarkets location(SMSA) = $5,500
A = Advertising expenditures for monthly (in dollars)

= $10,000

M = Microwave ovens Number sold in the SMSA supermarkets = 5,000
Option 1
Regression equation solution
QD= - 5200 – 42(500) + 20(600) + 5
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20(10000) + 0
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1898 elastic
Income
∆QD∆P* I/QD, I=$5,500, QD=17,650
= 5
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6203 elastic
Competitor’s Price

DEMAND ESTIMATION

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P= ∆Qd∆P* PX/Qd , PX=600, QD=17,650
=20* [600/ 17,650]= 0
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20* [10,000/17,650]=0
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25* 5,000/17,650= 0
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By growing the product’s demand for the company,
it may deem decreasing their prices of product which will direct to in general increase in the
product demand
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Increase in consumers income as well further
noticeably increase the demand for the products
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Nelson, (2013)
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If the competitors
make massive changes along with the old and the new price, the company should not be worried
as regards to their price changes
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By decreasing the
advertising expenditures may aid to advancing profits by the company, as advertisement as such
does not have much outcome on the demand of product
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Nelson, (2013)
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The company can
undertake and promote its product in higher levels income area nevertheless this will require
additional money and time to be devoted
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A
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By using the equation of demand provided, we will work out the effects of changes in price
made will have on the quantity demanded
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Supply curve
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89 + 79
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QS @100 cents = -7909
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1*100=0
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89 + 79
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11
QS@300 cents = -7909
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1*300=15820
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89 + 79
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11
QS@500 cents = -7909
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1*500=31640
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89 + 79
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11
Price levels

Supply quantity

100 cents

0

200 cents

7910
...
11

400 cents

23730
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11

600 cents

39550
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Computation of price and quantity equilibrium
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Quantity demanded[QD]=Quantity supplied[QS]= Equilibrium price [EP]
–5200– 42 P+43850= -7909
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1= EP
Equilibrium price determination
–5200– 42 P+43850 = -7909
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1P
7909
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1P
46559
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1P
384
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89/121
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475
Equilibrium Quantity [EQ]determination
QS = -7909
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1P
EQ = -7909
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1*384
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91
EQ=22502 units
D
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Market changes in the short-term typically includes
fluctuations in cost of products, changes in supply of the substitute goods, seasonal product
favored by the consumers, inflation price effects etc
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Changes in long-term in the market in contrast will consist of permanent changes in the
customer likings and preference for one better product in the market which directs to the
decrease in the products demand and supply
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Advancement in technology would direct the customers to start
utilizing more advanced substitute products which would result in decrease in demand for the
products of the company
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As the nation’s
financial system improves, consumers’ likings do swing towards better quality products dipping
the accessible company’s product supply and demand (R
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5
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With rise in income levels of the consumers, they have additional money for buying
existing products
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Products Supply will also increase moving
rightwards shift in both products supply and demand curves
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Further instances consist of
population increase, likings of particular product by consumers etc
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As a result products demand and supply
decreases and causes the leftward shift in the curve
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Change in consumers taste and preferences as well results in the supply and
demand leftward shift when the consumers disregards the existing products of the company for
better products in the market
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, (2013)
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R
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C
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H
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Managerial Economics: Applications,
Strategies and Tallapalli, N
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Aggregate demand and aggregate
supply in an economy



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