Demand Estimation Paper.docx - Running Head DEMAND ESTIMATION PROJECT TITLED ISCREAM 1 Demand Estimation Project Titled Iscream Student\u2019s Name

Demand Estimation Paper.docx - Running Head DEMAND...

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Running Head: DEMAND ESTIMATION PROJECT TITLED ISCREAM 1 Demand Estimation Project Titled Iscream Student’s Name Instructor’s Name Institution Course Date
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DEMAND ESTIMATION PROJECT TITLED ISCREAM 2 A brief background of the demand estimation project titled iScream: It is a Chicago start- up company that sells ice cream in several mobile ice cream trucks. The main focus is to implement a smart phone app to make it convenient for customers to locate the trucks and request service. Currently iScream offers just two products: regular vanilla ice cream cones and organic, low-fat ice cream cones (each with several toppings that are available at no extra cost). Per our recommendation the firm has kept monthly data when experimenting with price changes and has tasked us to help with interpretation of the data. Interpretation of the data begins with a scatter plot, which allows us to assess the relationship between each product. (Attached). As we interpret the scatter plots we see there is a negative relationship between the quantity sold and the price of the product. As the product price increase the quantity sold decreases and vice versa, this represent an inverse relationship. In providing a diverse interpretation of the data we would also want to consider using the Quantity demand as the dependent variable and the price as the independent variable. This means quantity will be influenced by price. In this case you would want to utilize the regression analysis tool. The analysis allows you to regress one dependent variable against several independent variables and provide standard error. Regressing the data gives us the equation Q= -225.262p +1452.927 for P1vsQ1 and Q= -67.4999p + 823.2771 for P2vsP1 (attached). Based on our regression data for an interpretation of the slope coefficients we have concluded that a price increase of 1 unit of ice cream sales is linked to an average decrease of -225.262 quantities for P1 and an average decrease of -67.4999 for P2. To verify those slope coefficients are accurate we view our P values on the regression analysis. We have 3.41 E-24 and 5.24 E-11 which are well below the 5% level so both are significant. A low P value provides you great confidence that you have achieved the 95% confidence level. We have also determine Due to regular Ice cream having a higher R2 value it is interpreted that it has the most explained variation in sales meaning that you are able to explain roughly 37% of the variability of Y from X. Based on our analysis we feel that consumers are more responsive to a change in price for the regular ice cream. Our analysis indicates for the price elasticity of demand is: - 1.098 (elastic) for regular and -.032 (inelastic) for organic. What does this tells us? This tells us how responsive the demand was. The negative sign tell us that these are inferior goods, the quantity and the demand does not move in the same direction.
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