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Week 1 Quiz - Questions

This JSON summarizes a document containing 4 questions about regression analysis, market equilibrium, and elasticity. Question 1 involves using regression to estimate revenues and costs as a function of focus group size. Question 2 involves using log-linear regression to analyze the impact of income changes on battery demand. Question 3 provides demand and supply functions for tomatoes and asks to find the equilibrium price and quantity initially and with an income increase. Question 4 determines own price elasticity for a product and the impact of a price rise.

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Miyuru Jayasundara
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40 views2 pages

Week 1 Quiz - Questions

This JSON summarizes a document containing 4 questions about regression analysis, market equilibrium, and elasticity. Question 1 involves using regression to estimate revenues and costs as a function of focus group size. Question 2 involves using log-linear regression to analyze the impact of income changes on battery demand. Question 3 provides demand and supply functions for tomatoes and asks to find the equilibrium price and quantity initially and with an income increase. Question 4 determines own price elasticity for a product and the impact of a price rise.

Uploaded by

Miyuru Jayasundara
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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MBA 525

Week 1 Quiz – Regression analysis and supply - demand analysis

Q1. [5%, Regression analysis 1; Use two decimal points.]


As the manager of a focus group company, you are interested in optimizing the number of
participants you include in focus groups for your clients. Over the past year, you ran a field
experiment, varying the number of participants you provided for each focus group. You
collected data on the number of participants you provided for each focus group. You
collected data on the number of participants (X), focus group costs (C), and revenues (R )
from clients found in ‘focus group.xls’ (at course Moodle)
a. Estimate revenues as a function of focus group size, using both X and X2 in the
regression. Write out the equation for revenue as a function of focus group size based
on your regression. Are all variables statistically significant?
b. Estimate costs as a function of focus group size, using both X and X2 in the regression.
Write out the equation for cost as a function of focus group size based on your
regression. Are all variables statistically significant?
c. Using marginal analysis, find an optimum size of a focus group that maximizes net
benefits.

Q2. [5%, Regression analysis 2; Use two decimal points.]


You are the manager of a firm that sells a leading brand of alkaline batteries. A file named
‘batteries.xls’ with data on the demand for your product is available online at course
Moodle. Specifically, the file contains data on the natural logarithm of your quantity sold,
price, and the average income of consumers in various regions around the world. Use this
information to perform a log-linear regression, and then determine the likely impact of a
10 percent decline in global income on the overall demand for your product. Make sure to
include the regression output and the demand equation. And make sure to state whether
this alkaline battery is normal good or inferior good.
Q3. [6%, Market equilibrium]

Demand function estimated for tomatoes is Qd = 140 – 40p + 20pa + 0.01Y, where Qd
is the quantity of tomatoes demanded, p is the price of tomatoes, pa is the price of
avocado, and Y is the income of consumers. Supply function for tomatoes is Qs = 60
+ 10p – 20pf , where Qs is the quantity of tomatoes supplied, p is the price of
tomatoes, pf is the price of fertilizer.

a. When pa = $1, Y = $4,000, and pf = $0.50, derive the demand and supply curves of
tomatoes.

b. What is the equilibrium price and quantity of tomatoes?

Now, suppose that consumers’ income increases to $9,000.


c. What is the new market equilibrium price and quantity of tomatoes? Make sure to
show your answer in a graph as well.

Q4. [4%, Elasticity]

Suppose the demand function for a firm’s product is given by

ln𝑄𝑄𝑥𝑥𝑑𝑑 = 200 − 1.5𝑙𝑙𝑙𝑙𝑃𝑃𝑥𝑥 − 2𝑙𝑙𝑙𝑙𝑃𝑃𝑦𝑦 − 0.5𝑙𝑙𝑙𝑙𝑙𝑙

where, Px = $15, Py = $6, M=$40,000. Note that ε = (dQ /dp)*(p/Q).

a. Determine the own price elasticity of demand, and state whether demand is
elastic, inelastic, or unitary elastic.

b. Based on this own price elasticity, what would happen in the quantity demanded
with a 10% rise in the price?

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