Assignment 1

Q.1) Fresh Food has recently carried out a survey of the demand for their seasonal fruits. They observed the following
outcomes over the last seven months:

Quantity
Sold Price Advertising
8500 $ 2 $ 2,800
4700 $ 5 $ 200
5800 $ 3 $ 400
7400 $ 2 $ 500
6200 $ 5 $ 3,200
7300 $ 3 $ 1,800
5600 $ 4 $ 900

Regression Statistics
Multiple R 0.980681431
R Square 0.961736068
Adjusted R
Square 0.942604102
Standard
Error 310.5239249
Observations 7

ANOVA
Significance
df SS MS F F
Regression 2 9694299.568 4847150 50.268544 0.001464128
Residual 4 385700.4318 96425.11
Total 6 10080000

Standard Upper Lower Upper

Coefficients Error t Stat P-value Lower 95% 95% 95.0% 95.0%
Intercept 8536.213882 386.9117478 22.06243 0.000024981 7461.974654 9610.453 7461.9747 9610.453
-
Price -835.7223514 99.65304469 -8.38632 0.00110606 -1112.40356 -559.041 1112.4036 -559.041
Advertising 0.592228496 0.104346803 5.675579 0.00475531 0.302515325 0.881942 0.3025153 0.881942

RESIDUAL
OUTPUT PROBABILITY OUTPUT

Predicted Quantity
Observation Quantity Sold Residuals Percentile Sold
-
1 8523.008967 23.00896712 7.14285714 4700
2 4476.047825 223.9521754 21.4285714 5600
-
3 6265.938227 465.9382265 35.7142857 5800
 4 7160.883427 239.1165726 50 6200
-
5 6252.733311 52.73331119 64.2857143 7300
6 7095.05812 204.9418798 78.5714286 7400
-
7 5726.330123 126.3301229 92.8571429 8500

A. Estimate sales when the price is $50 and advertising is $100,000, stating any assumption that you need to make.

B. If the firm charges $50 but increases advertising to $110,000, what conclusions can you derive in terms of revenues
and profits?

Q.2) The demand for dog treats is represented by the following equation.

QD =300-50P

Qs = - 100 + 150P

Determine equilibrium Quantity Demand, Quantity Supply and Price.

Mini Case Study

Shift in supply: good weather for salmon (trout) fishing

In the summer of 2000, weather conditions were excellent for commercial salmon fishing off the California coast. Heavy

rains meant higher than normal levels of water in the rivers, which helped the salmon to breed. Slightly cooler ocean

temperatures stimulated the growth of plankton—the microscopic organisms at the bottom of the ocean food chain—

providing everything in the ocean with a hearty food supply. The ocean stayed calm during fishing season, so

commercial fishing operations did not lose many days to bad weather.

How did these climate conditions affect the quantity and price of salmon?

The demand and supply model and table below provide the information we need to get started!
 Price per pound Quantity supplied in 1999 Quantity supplied in 2000 Quantity demanded

$2.00 80 400 840

$2.25 120 480 680

$2.50 160 550 550

$2.75 200 600 450

$3.00 230 640 350

$3.25 250 670 250

$3.50 270 700 200

A). Draw a demand and supply model representing the situation before the economic event took place.

B). Decide whether the economic event being analyzed affects demand or supply.

C). Decide whether the effect on demand or supply causes the curve to shift to the right or to the left, and sketch the
new demand or supply curve on the diagram.

D). Identify the new equilibrium and then compare the original equilibrium price and quantity to the new equilibrium
price and quantity.

E). What does those numbers mean exactly?