Question
In: Economics
A snack company’s data analysts have estimated the following elasticities for sales of the firm’s products....
A snack company’s data analysts have estimated the following elasticities for sales of the firm’s products. Price elasticity is –2.5. Income elasticity is –0.8. Cross-price elasticity with chocolate bars is +0.5. Advertising elasticity is +0.8. Marginal cost is $6.
i) What is the optimal profit margin (P – MC)/P in percent?
ii) What is the optimal price?
iii) If the price of chocolate bars increases by 10%, by how much do the sales of the company change? (Pay attention to the right sign.)
iv) If the price of chocolate bars increases by 10%, and consumer incomes decrease by 5% at the same time, by how much do the sales of the company change? (Pay attention to the right sign.)
v) If the firm wants to achieve 20% sales growth, by how much does it need to increase its advertising expenditure?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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University of Richmond Professor Erik Craft analyzed the states’
pricing of vanity plates. He found that in California, where vanity
plates cost $28.75, the elasticity of demand was 0.52. In
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4) The estimated price elasticities of demand for certain products are listed in the table. Indicate...
4) The estimated price elasticities
of demand for certain products are listed in the table. Indicate if
Product B would have a more elastic or less elastic demand and
why.
Product A
Estimated
Elasticity for
Product A
Product B
Is Estimated Elasticity for
Product B More Elastic or Less
Elastic than for Product A?
Beer
-0.29
Samuel Adams
Boston Lager
Chicken
-0.37
Organically
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Cocaine
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Illegal
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The management of the Mini Mill Steel Company estimated the following elasticities for a special type...
The management of the Mini Mill Steel Company estimated the
following elasticities for a special type of steel: EP 2, 1, and E
where x refers to steel XY and Y to aluminum. Next year, the firm
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In a study published in 1980, B.B. Gibson estimated the following price and income elasticities of...
In a study published in 1980, B.B. Gibson estimated the
following price and income elasticities of demand for six types of
public goods.
State Activity Price Elasticity Income
Elasticity
Aid to the poor -.83 .26
Pollution control -.99 .77
College and universities -.87 .92
Elementary school aid -1.26 1.14
Parks & recreation areas - 1.09 1.06
a. Do these public goods conform to the law of demand?
Which goods are elastic? Explain. b. Which goods are normal goods
and which...
A supermarket chain analyzed data on sales of a particular brand of snack cracker at 104...
A supermarket chain analyzed data on sales of a
particular brand of snack cracker
at 104 stores for a certain one week period. The analyst
decided to build a regresion model to predict the unit amount of
sales of the snack cracker based on the total unit amount of sales
of all brands in the snack cracker category (excluding the cracker
itself).
a. Develop a linear regression model that helps predict
the cracker sales. Show the
prediction equation.
CategorySales
Sales...
A supermarket chain analyzed data on sales of a particular brand of snack cracker at 104...
A supermarket chain analyzed data on sales of a
particular brand of snack cracker
at 104 stores for a certain one week period. The analyst
decided to build a regresion model to predict the sales of the
snack cracker based on the total sales of all brands in the snack
cracker category.
a. Develop a linear regression model that helps predict
the cracker sales. Show the
prediction equation.
b. Is there sufficient evidence at 2.5% significance
level to claim that...
A supermarket chain analyzed data on sales of a particular brand of snack cracker at 104...
A supermarket chain analyzed data on sales of a
particular brand of snack cracker
at 104 stores for a certain one week period. The analyst
decided to build a regresion model to predict the sales of the
snack cracker based on the total sales of all brands in the snack
cracker category.
d. Make a prediction for sales in a week where sales in
the entire snack
cracker category is
1005.
CategorySales
Sales
1348
394
1110
388
1096
357
1208...
A supermarket chain analyzed data on sales of a particular brand of snack cracker at 104...
A supermarket chain analyzed data on sales of a
particular brand of snack cracker
at 104 stores for a certain one week period. The analyst
decided to build a regresion model to predict the sales of the
snack cracker based on the total sales of all brands in the snack
cracker category.
b. Is there sufficient evidence at 2.5% significance
level to claim that linear
relationship exists between
category sales and cracker sales? Show the
test, and make the
conclusion....
A supermarket chain analyzed data on sales of a particular brand of snack cracker at 104...
A supermarket chain analyzed data on sales of a
particular brand of snack cracker
at 104 stores for a certain one week period. The analyst
decided to build a regresion model to predict the sales of the
snack cracker based on the total sales of all brands in the snack
cracker category.
f. Produce a 90% confidence prediction interval for the
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Given the price elasticities and price changes for the following products A–E in the table below,...
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will have on total revenue (indicating an increase or decrease).
Round your answers to 1 decimal place.
Product
Price elasticity
% ∆ Price
%∆ Quantity
∆ Total revenue
A
0.6
increase by 9%
(Click to
select) decrease increase by %
(Click to
select) increase decrease constant
B
1.3
decrease by 6%
(Click to
select) increase decrease by %
(Click...
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