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Question And Answers: Coefficient Of The Price Of Pizza

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Answer a:
Coefficient of the Price of pizza:
This coefficient identifies effect of Price of Pizza. This term provides information that how the average demand for pizza can change with the change in the price of Pizza changes. The Coefficient is -100P where P is the price of Pizza. If there is increase in one unit price of Pizza then the demand for pizza decrease by 100 units. Because -100 X 1 will result in decrease by 100 and if P is 2 then decrease will be -100 X 2 = -200.
Coefficient of the Price of hot dogs:
This coefficient provides information that how on average the demand for pizza can change with variation in the price of hot dogs. Price of hot dog is $1.00 unit. Coefficient for hot dogs in the equation is provided as +1.5Phd. Thus if there is increase in price of hot …show more content…
The coefficient of Price of soft drink in equation is - 5Psd. Here we can see, if the price of soft drink increases by one unit then the demand for pizza will decrease by 5 units.
Coefficient of the Advertising term: This coefficient provides information that how on average the demand for pizza can change with variation in the price of advertising term. The coefficient of Advertising term is + 20A. If there is increase of unit price in advertising term, the demand for pizza increases by 20 X 1 = 20 units.
Coefficient of the Percentage of population for pizza: This coefficient provides information that how on average the demand for pizza can change with variation in the percentage of population for pizza. Value of this coefficient is + 15Pop. And this is in percentage. Therefore, if there is 1% increase in price of hot dog, the demand for pizza increases by 15X 1 = 15 units.
Reduced estimated equation:
After submitting the given values of non price variables will be:
QD = -100P + ( 1.5 * 100 ) – ( 5 * 75 ) + ( 20 * 20 ) + ( 15 * 35 ) = 700 –

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