Price elasticity.pdf - Assignment 1 A1 FACTOR WITH ELASTICITY OF DEMAND1 Price of oil Price of product changes the elasticity of demand It is dependent

Price elasticity.pdf - Assignment 1 A1 FACTOR WITH...

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Assignment 1 A1) FACTOR WITH ELASTICITY OF DEMAND - 1. Price of oil - Price of product changes the elasticity of demand. It is dependent on formula % change in quantity demanded by % change in price. 2. Price of competitors - Price of competitors product affect the cross elasticity of demand. It is dependent on formula % change in quantity demanded by % change in price. 3. Customers per capita income - In come elasticity of demand can be calculated using the per capita income of customer. It is dependent on formula % change in quantity demanded by % change in per capita income. 4. Expenditure on promotion - Expenditure of the oil has a good impact on the quantity demanded as it shifts the curve towards the right. The demand functional using multiple linear regression is as follows: Done by Excel:
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Done by R: Demand for oil = 5024.58 -136.62(Price of oil ) + 117.41(Price of competitor’s products) – 0.2823(Per capita income of consumers) + 7.87 (Promotional Expenditure of Mustard oil)
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A2) The intercept in the demand function shows that the demand of Maa mustard oil shall be 5024 rupees when price of Maa mustard oil, price of competitor's products, per capital income of consumers and promotional expenditure of Maa mustard oil is zero.
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