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Problem Set 2

This document contains 3 questions from a managerial economics problem set regarding analyzing sales data from various companies. Question 1 asks to analyze sales data over 8 months from a product to determine if sales are affected more by price level or price change. It also asks to interpret regression coefficients, draw a graph, and forecast September sales. Question 2 provides mobile phone sales data over 15 months and asks to estimate 3 demand curves, why 3 are needed, and estimate sales and revenues under different price and advertising levels. Question 3 provides a demand relationship for another product estimated over 4 years. It asks to interpret the model and make sales forecasts under different price and income levels, and estimate the effect of a 5% price increase

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50 views2 pages

Problem Set 2

This document contains 3 questions from a managerial economics problem set regarding analyzing sales data from various companies. Question 1 asks to analyze sales data over 8 months from a product to determine if sales are affected more by price level or price change. It also asks to interpret regression coefficients, draw a graph, and forecast September sales. Question 2 provides mobile phone sales data over 15 months and asks to estimate 3 demand curves, why 3 are needed, and estimate sales and revenues under different price and advertising levels. Question 3 provides a demand relationship for another product estimated over 4 years. It asks to interpret the model and make sales forecasts under different price and income levels, and estimate the effect of a 5% price increase

Uploaded by

Asfawosen Dingama
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Managerial Economics

Problem Set 2

Submission Date October 04

Q1. The following data relate to the sales of a product over an eight-month
Period:

a. Investigate whether sales are affected more by the level of price or by the change in price of
the product.
b. Interpret the regression coefficient of the explanatory variable.
c. Draw an appropriate graph of the data and relationship.
d. Forecast sales in September if price is £65.

Q2. AIKON Inc. has recently carried out a survey of the demand for their mobile phones. They
observed the following over the last fifteen months:

a. Estimate three appropriate demand curves.


b. Why is it necessary to estimate three different demand curves?
c. Estimate sales when the price is £50 and advertising is £100,000, stating any assumptions that
you need to make.
d. If the firm charges £50 but increases advertising to £110,000, what conclusions can you derive
in terms of revenues and profit?
Q3. KAD has estimated the following demand relationship for its product over the last four
years, using monthly observations:

Where Q=sales in units, P=price in £, Y is income in £,000, and the numbers


in brackets are t-statistics.
a. Interpret the above model.
b. Make a sales forecast if price is £9, income last month was £25,000 and sales last month were
2,981 units.
c. Make a sales forecast for the following month if there is no change in price or income.
d. If price is increased by 5 per cent in general terms, estimate the effect on sales, stating any
assumptions.

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