Assignment 1: Demand EstimationDue Week 3Imagine that you work for the maker of a leading brand of low-calorie frozen, microwavable food that estimates the following demand equation for its product using data from 26 supermarkets around the country for the month of April.For a refresher on independent and dependent variables, please go to Sophiaâs Website and review the Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independent-and-dependent-variables–3.Faculty Note: Prior to Week 1, you will select one (1) of the two (2) following equation options for students to use in order to complete this assignment.â¢ Copy and paste the selected equation option into an MS-Word document.â¢ Attach the MS-Word document with the selected equation to Assignment 1 within the course shell.Option 1Note: The following is a regression equation. Standard errors are in parentheses for the demand for widgets.QD = – 5200 – 42P + 20PX + 5.2I + .20A + .25M(2.002) (17.5) (6.2) (2.5) (0.09) (0.21)R2 = 0.55 n = 26 F = 4.88Your supervisor has asked you to compute the elasticities for each independent variable. Assume the following values for the independent variables:Q = Quantity demanded of 3-pack unitsP (in cents) = Price of the product = 500 cents per 3-pack unitPX (in cents) = Price of leading competitorâs product = 600 cents per 3-pack unitI (in dollars) = Per capita income of the standard metropolitan statistical area(SMSA) in which the supermarkets are located = $5,500A (in dollars) = Monthly advertising expenditures = $10,000M = Number of microwave ovens sold in the SMSA in which thesupermarkets are located = 5,000Write a four to six (4-6) page paper in which you:1. Compute the elasticities for each independent variable. Note: Write down all of your calculations.2. Determine the implications for each of the computed elasticities for the business in terms of short-term and long-term pricing strategies. Provide a rationale in which you cite your results.3. Recommend whether you believe that this firm should or should not cut its price to increase its market share. Provide support for your recommendation.4. Assume that all the factors affecting demand in this model remain the same, but that the price has changed. Further assume that the prices are 100, 200, 300, 400, 500, 600 cents.a) Plot the demand curve for the firm.b) Plot the corresponding supply curve on the same graph using the following MC/supply function Q = -7909.89 + 79.0989P with the same prices.c) Determine the equilibrium price and quantity.d) Outline the significant factors that could cause changes in supply and demand for the product. Determine the primary manner in which both the short-term and the long-term changes in market conditions could impact the demand for, and the supply, of the product.5. Indicate the crucial factors that could cause rightward shifts and leftward shifts of the demand and supply curves.6. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.Your assignment must follow these formatting requirements:â¢ Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.â¢ Include a cover page containing the title of the assignment, the studentâs name, the professorâs name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.The specific course learning outcomes associated with this assignment are:â¢ Analyze how production and cost functions in the short run and long run affect the strategy of individual firms.â¢ Apply the concepts of supply and demand to determine the impact of changes in market conditions in the short run and long run, and the economic impact on a companyâs operations.â¢ Use technology and information resources to research issues in managerial economics and globalization.â¢ Write clearly and concisely about managerial economics and globalization using proper writing mechanics.Additional RequirementsMin Pages: 5Level of Detail: Show all workOther Requirements: 1- Quantity demanded is 3, and prices should be changed to dollars.
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