This website uses cookies to ensure you have the best experience. Learn more

Eco 550 Week 3 Assignment 1

1494 words - 6 pages

ECO550 Week 3 Assignment 1
ECO 550

Part 1:
QD = - 5200 – 42P + 20C + 5.2(I) + 0.20(A) + 0.25(M)
By converting the cent values into dollars and by putting the values of Price, competitions, income, Advertisement and number of oven, we shall have the following demand.
So 500 cents= 5 Dollar
600 Cents= 6 Dollars
QD=-5200-42(5)+20(6)+5.2(5500)+0.2(10,000)+0.25(5000)
QD = -5200-210+120+28600+2000+1250
QD = 26,560 units
Ep ( Price elasticity of demand)
Own price elasticity of demand (ep) = ∂Q∂P×PQ
∂Q∂P = -42, P = 5, Q = 26,560
Own Price elasticity (ep) = - 42 × 526,560 x 100= - 0.79 (approx.)
EX (Cross Price elasticity-in terms of competitors’ products)
Cross price ...view middle of the document...

45%.   The cross price elasticity is less than 1, which shows that people are less likely to switch over to the competitors’ goods even for a price change. Therefore, an increase in the price may lead to higher net revenues (price x quantity may be higher than the current price x quantity).This product is fairly inelastic to a competitor’s price and there is no need to be concerned about the competitor since their pricing won’t affect sales. (Kreps, 2013)
Income elasticity
Income-elasticity is 1.077.  This indicates that a 1% rise in the average area income will boost the quantity demanded by 1.077%.  This ratio is almost equal to 1, which means that people’s income is directly proportionate to the quantity demanded by these persons. Therefore, the price should be made affordable so that more people would be able to purchase the item. This again, may result in a higher net revenue than if price was higher but less people purchased the goods.In this aspect, the product is elastic and the company can make the decision to raise the price if the average income rises.
Advertisement elasticity
Advertisement elasticity is 0.075. which means that a 1% increase in advertising expenses will raise the quantity demanded by only 0.075%.  The advertisement elasticity is very low; this means that very few people would purchase the items sold even after substantial funds have been spent on advertisement. Therefore, advertisement is not very beneficial.Therefore, demand is rather inelastic to advertising. For that reason, more advertisement doesn’t automatically mean that a company can raise the price because that still could drive customers away.
Supply elasticity
With respect to microwave ovens in the area, elasticity is 0.047, which shows an elevation of 1%  in the number of ovens in the area increasing the quantity demanded by a mere 0.047%. Therefore, in this aspect, demand is inelastic and the pricing strategy can simply skip this element.The supply elasticity being low shows that the suppliers will not change their quantity too much even if the price increased or decreased. However, a supplier is unlikely to sell an item below cost. (Henderson, 1958)
Part 3
The following factors should be considered:
* Price elasticity of less than 1 shows that the net percentage increase in the quantity of the products demanded will be lesser than percent change required in the price. Thus, a higher percentage of price cut will only attract a small percent of new customers.
* Due to low cross price elasticity, very few people are likely to switch over from competitors’ to their products.
* The supply elasticity is very low, which means that price cuts won’t increase the quantities provided. Therefore, increase in the net revenue from increased quantities in the quantity x price formula will not be possible.
Hence, the firm should not cut its price.

Part 4
A.        Plot the demand curve for the firm.
 
With all other factors constant, the...

Other Papers Like Eco 550 Week 3 Assignment 1

Eco 550 Assignment 2

1522 words - 7 pages cost of other variable inputs is $2,000 per day. You are told that the firm's fixed cost is “high enough” so that the firm's total costs exceed its total revenue. The marginal cost of the last unit is $30. This assignment allows you to determine the specific details about this fictitious company in order to conduct an environmental scan of this company. Write a three to four (3-4) page paper in which you: 1. Briefly describe the details

Eco 550 Assignment #2

1424 words - 6 pages factors: 1. There might be inadequate capital to continue a business enterprise 2. There is a possibility of discontinuing a business if there is no proper inventory management. Inventory is necessary to maintain equilibrium in between demand and supply. If this equilibrium is disturbed this might lead to business shut down. 3. Unexpected growth of the business might also be a reason of discontinuing the operations. If we see that

Eco 550 Mid Test Bank 1

2610 words - 11 pages revenue more than costs or reduces costs more than revenue b. it decreases some costs more than it increases others (assuming revenues remain constant) c. it increases some revenues more than it decreases others (assuming costs remain constant) d. all of the above e. b and c only ANS: D PTS: 1 3. In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at

Eco Assignment 3

1491 words - 6 pages Assignment 3 Harriet Watson 12/01/2011 DR. Patton Strayer University 1. How is the CPI used? The CPI is used an economic indicator. The CPI is the most widely used measure of inflation, the CPI is an indicator of the effectiveness of government policy. In addition, business executives, labor leaders and other private citizens use the index as a guide in making economic decisions. The CPI is also used as a deflator of

Eco 550 Assignment 2

1311 words - 6 pages and maximize profits. Cost of production also involves various factors, such as environmental and political factors. The company can be operating in an unfavorable environment characterized by high cost of inputs (Wheeler, 2009). The most favorable way of continuing operations will then include an attempt to minimize production margins to a level that accommodates what the company can offer, in terms of inputs. Recommendations 1. The

Week 3 Assignment 2

1564 words - 7 pages Week 3 Assignment 2 Personality & Attitudes 1. What did you think of the profile assessment? How did you feel while taking it? I took it imagining I was a job candidate I felt nervous about it as do all job candidates. I also felt confident as I would have been shocked if I somehow “failed” the personality profile or assessment. One misconception we see in the general public is the use of the word “test” when they refer to profile

Week 3 Lab Assignment

3108 words - 13 pages general ledger software package. If you are working on this assignment on your home computer, load the software following the instructions contained on the CD envelope. As with any other computer file, it is important to back up frequently to another storage medium. SETTING UP A NEW COMPANY Requirements 1. Start Peachtree Complete Accounting 2010® and click on Create a new company. Figure 1 2. The Introduction screen that appears next

Week 3 Assignment

761 words - 4 pages Team Assignment – Ch.6 & Ch. 7 Textbook Exercises Earl Morse, Jennifer Schelper, Molly Todd, Vivian Costa 6-26 (Audit programs and assertions) Assume that you are responsible for developing an audit program for a manufacturing client that sells to over 1,400 customers. You want to ensure your audit program addresses all relevant assertions for sales and accounts receivable. Address the following question in the context of the audit

Week 3 Individual Assignment

955 words - 4 pages of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of individual items. The distributor keeps its inventory in its own distribution center and two public warehouses. An inventory computer file is maintained on a computer disk and at the end of each day the file is updated. Each record of the inventory file contains the following data: 1. Item number 2. Location of item 3. Description

Eco 550 Week 5 Dq

802 words - 4 pages Economic Alternatives = 3 ($45, 000 job, $35, 000 job and -$38, 000 research program) Desired Alternative = - 38, 000 (shown in negative as it this alternative would cost the subject rather than earn him financial remuneration) Next Best Alternative = 45, 000 Since, Opportunity Cost = Cost of Selected Alternative - Cost of Next Best Alternative Therefore, Opportunity Cost = -38, 000 -45, 000 = -83, 000 So, his opportunity cost not only

Eco 372 Week 5 Learning Team Assignment

1659 words - 7 pages ECO/372 Effects of the United States' Deficit, Surplus, and Debt The United States goes through a large amount of changes every day and there are certain things that affect all Americans. When the United States goes through deficit at times, surplus, and debit and when these things happen everything is affected. Students, business owners, and even car manufacturers are affected. These three types of budget issues happen to the United States

Related Essays

Eco 550 Assignment 1

938 words - 4 pages Demand Estimation Jasmine P ECO 550 Professor Sumadi May 3, 2015 Compute the elasticities for each independent variable. Note: Write down all of your calculations. QD = - 5200 - 42P + 20PX + 5.2I + .20A + .25M P = 500 PX = 600 I = 5500 A = 10,000 The quantity demanded is calculated as: Qd = -5200 – 42(500) + 20(600) + 5.2(5500) + 0.2(10000) +0.25(5000) = 17,650 Calculate Price Elasticity: Price Elasticity = (P/Q) * (Dq

Eco 550 Assignment 1

1047 words - 5 pages nment Assignment 1 “Making Decisions Based on Demand and Forecasting” Strayer University ECO 5550 – Managerial Economics and Globalization May 12, 2013 Making Decisions Based on Demand and Forecasting There are several demographic and independent variables which are relevant in completing a demand analysis for pizza in Loudoun County, Virginia. The first variable that I used in completing my demand analysis is the average cost

Eco 550 Assignment 1

1232 words - 5 pages Imagine that you work for the maker of a leading brand of low-calorie microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April. Use the following demand equation concerning the questions of this assignment. This equation has been estimated through linear regression. The independent variables are: price of the product discussed in this assignment (P

Assignment 1 Eco 550

1232 words - 5 pages Imagine that you work for the maker of a leading brand of low-calorie microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April. Use the following demand equation concerning the questions of this assignment. This equation has been estimated through linear regression. The independent variables are: price of the product discussed in this assignment (P