Similarly, 117.408 is an estimate of the expected increase in demand function d corresponding to a 1 unit increase in Compe_price(cp) when all others factors are held constant. Similarly, .282 is an estimate of the expected decrease in demand function d corresponding to a 1 unit increase in inc_per_capita(ipc) when all others factors are held constant. Similarly, 7.865 is an estimate of the expected increase in demand function d corresponding to a 1 unit increase in pro_exp(pe) when all others factors are held constant. Price Elasticity Demand: PED = S l ope * Own_price(Sep) / Demand_Maa(Sep) PED = - 136. 617 * 91.38 / 1 3256 = - 0. 94 whi c h i s not hi ng but . 94 a s PED a l wa ys ne ga t i ve be c a us e of l a w of de ma nd. I t f a l l s unde r 0 < PED < 1 a Rel at i vel y i nel as t i c whi c h t e l l s us t hat mor e c hange i n t he pr i c e of t he g oods but l es s c ha nge i n t he quant i t y de ma nd Cross Price Elasticity Demand: CPED = Slope * compe_price(Sep) / demand_maa(Sep) CPED = 117.408 * 109.14/13256 = .96 As the CPED is +ve , the goods are substitutes Income Elasticity of Demand: IED = Slope * inc_per_capita(Sep)/demand_maa(Sep) IED = -.282*7545.15/13256 = -.16 It falls under IED < 0 Inferior good, which tells us that the demand for these goods decreases as the level of income rises.
Q3: What would be the impact of a price change by HOI on the total revenue of Maa Mustard oil, keeping other variables constant? Answer: As the demand for Maa Mustard oil is inelastic to price. So, price inelastic says if the price increases then total revenue will increase and if price decrease, then total revenue will decrease. Q4 :What is the optimum price at which total revenue can be maximized for Maa Mustard oil if the competitors price do not increase in October 2015(Scenario 1)? If competitors price increase their prices by around 6 percent , as suggested in the case(Scenario 2), What would be the optimum price? Does the
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- Spring '18
- Supply And Demand, Maa Mustard Oil