Assignment 2: Operations Decision

Assignment 1: Demand Estimation

Due Week 3 and worth 200 points

Imagine 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 Sophia’s Website and review the

Independent and Dependent Variables tutorial, located at http://www.sophia.org/tutorials/independentand-

dependent-variables--3.

Note: Your professor will provide you with the equation and data necessary for you to complete this

assignment. You will find this information attached to Assignment 1 within the course shell.

Write 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 shortterm

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 price changes are 100, 200, 300, 400, 500, 600 dollars.

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:

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.

Include a cover page containing the title of the assignment, the student’s name, the professor’s

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:

Analyze how production and cost functions in the short run and long run affect the strategy of

individual firms.

ECO 550 – Assignments and Rubrics

© 2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information

and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of

Strayer University.

ECO 550 Student Version 1144 (1041 3-27-2014) Final

Page 2 of 15

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 company’s operations.

Use technology and information resources to research issues in managerial economics and

globalization.

Write clearly and concisely about managerial economics and globalization using proper writing

mechanics.

Grading for this assignment will be based on answer quality, logic / organization of the paper, and

language and writing skills, using the following rubric.

Points: 200 Assignment 1: Demand Estimation

Criteria Unacceptable

Below 70% F

Fair

70-79% C

Proficient

80-89% B

Exemplary

90-100% A

1. Compute the

elasticities for each

independent variable.

Note: Write down all of

your calculations.

Weight: 15%

Did not submit or

incompletely

computed the

elasticities for each

independent

variable.

Partially computed

the elasticities