Marketing Management HW 1 solutions

Marketing Management HW 1 solutions - Illinois Institute of...

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Illinois Institute of Technology – Stuart School of Business Marketing Management : Problem Set #1 Professor Arjun Chakravarti DUE DATE: Beginning of Class Week 3. Review of Basic Materials: This homework provides an overview of some very basic skills and concepts needed to succeed in this class. If you are having trouble with any of these concepts, you should consider taking significant measures to get up to speed. INSTRUCTIONS: Homeworks will not be graded but must be turned in on time. Late submissions are not allowed. They will be useful for the midterm and final exams. You may work on these problem sets in groups of size 3 to 5. I. GRAPHING BASICS 1. Imagine that you are given a demand equation: Y = α + β X where α = 24 and β = -1.5 Y = Quantity Demanded for a product p X = Price of Product x. (a) Identify the dependent variable(s) and explain why it is the dependent variable. Answer: Y (Quantity Demanded) is the DV. (b) Identify the independent variable(s) and explain why you chose this variable. ANS: X (Price of x) is the DV (c) What does it mean for β (the coefficient of X) to be -1.5 ? Interpret this in economic terms. ANS: A one unit increase in the price of product X increases Qd for product j by 1.5 units. (Note: this indicates that Product X is a SUBSTITUTE for product J) (d) What does it mean in economic terms for α to equal 24? ANS: If X were equal to zero, Qd for a product would still equal 24 units. This might be because we have not modeled other aspects of the Qd for product p, such as the PRICE of product p (And other factors)!
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(e) In standard microeconomics, explain why this curve is a measure of total market demand. 2. Now imagine that you are given the following demand equation: lnY = ln ( α ) + β 1 ln(X) + β 2 ln(Z) , where Y = Quantity Demanded for a product p X = Price of Product x. Z = Price of Product z.
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This note was uploaded on 11/07/2011 for the course ECON 101 taught by Professor Johnson during the Spring '11 term at Sciences Po.

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Marketing Management HW 1 solutions - Illinois Institute of...

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