Eco 550 Case Study

748 Words 3 Pages
Carlos Brown ECO 550 October 14, 2016 Dr. Bonina

1.Compute all elasticities for each independent variable.
Option 1
Quantity Demanded
= (-5200) - 42 (500)+20 (600)+ 5.2(5,500)+ .20(10,000)+ .25(5,000)
=(-5200) -21000+12000+28600+2000+1250 is 17650
=17650
Cross Price Elasticity
=20 Px is 600, QD is 17650
=20 600/17650
=0.6
Income Elasticity
5.2, I is 5500, QD is 17650
=5.2(5500/17650)
=1.62
Advertisement Elasticity
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Provide a rationale in which you cite your results.
Price of the product elasticity= -42(500/17,650) = -1.19. I would determine that the price of the microwaveable food product is elastic, showing that the price of the product will alter the demand. When the price of the product maximizes the need of the frozen microwaveable food will decline and the same goes for the price of the microwaveable food decline, the need for them will be larger.

Cross elasticity= 20 600/17,650 is .68. The cross elasticity is positive, implicating that there is supplemental products. The elasticity is fewer than 1, which means that they are not good alternates and the competitor’s price has a lesser impact to the sale
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Factors that could change regarding supply and demand for the firm is its cost of food and the cost of the production of the product. As mentioned before if the firm diminishes the price of there products the demand will rise, but if the cost of the production maximizes then the supply lessens.
5. Conforming to the law of demand if all factors remain equal, the higher the price of the goods the less people will demand those goods. In other words the greater the price the less the quantity demanded. The firm would not have a lot of people buying if they increased their price of their microwave foods. The demand and supply curve may change left do to the bad product views, if customers notice that product has bad reviews they will probably second guess about buying that product. For instance possibly there was a research to display that the small calorie microwave food makes silent strokes, which could possibly lessen the demand and change the curve. Competition could also make the demand curve change to the left as customers put an end to purchasing a product to undertake a new product. The demand and supply curve may change right as a result

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