Using the data below, I need answers to the following questions:
a) Using the data in Table 1, specify a linear functional form for the demand for Combination 1 meals, and run a regression to estimate the demand for Combo 1meals.
b) Using statistical software (Excel), estimate the parameters of the empirical demand function specifiedin part a.Write your estimated industry demand equation.
c) Evaluate your regression results by examining signs of parameters, p-values, and the R2.
d) Discuss how the estimation of demand might beimproved.
e) If the owner plans to charge a price of 4.15 for a Combination 1 meal and spend $18,000 per week on advertising, how many Combination 1 meals do you predict will be sold each week?
f) If the owner spends $18,000 per week on advertising, write the equation for the inverse demand function. Then, calculate the demand price for 50,000 Combination meals.
Estimation and Analysis of Demand for Fast Food Meals
You work for PriceWatermanCoopers as a market analyst. PWC has been hired by the owner of two Burger King restaurants located in a suburban Atlanta market area to study the demand for its basic hamburger meal packageâreferred to as âCombination 1" on its menus. The two restaurants face competition in the Atlanta suburb from five other hamburger restaurants (three MacDonaldâs and two Wendyâs restaurants) and three other restaurants serving âdrive-throughâ fast food (a Taco Bell, a Kentucky Fried Chicken, and a small family-owned Chinese restaurant).
The owner of the two Burger King restaurants provides PWC with the data shown in Table 1. Q is the total number of Combination 1 meals sold at both locations during each week in 1998. P is the average price charged for a Combination 1 meal at the two locations. [Prices are identical at the two Burger King locations.] Every week the Burger King owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. A is the dollar amount spent on newspaper ads for each week in 1998. The owner could not provide PWC with data on prices charged by other competing restaurants during 1998. For the one-year time period of the study, household income and population in the suburb did not change enough to warrant inclusion in the demand analysis.
TABLE 1: Weekly Sales Data for Combination 1 Meals (1998)
week Q P A week Q P A
1
51,345
2.78
4,280
27
78,953
2.27
21,225
2
50,337
2.35
3,875
28
52,875
3.78
7,580
3
86,732
3.22
12,360
29
81,263
3.95
4,175
4
118,117
1.85
19,250
30
67,260
3.52
4,365
5
48,024
2.65
6,450
31
83,323
3.45
12,250
6
97,375
2.95
8,750
32
68,322
3.92
11,850
7
75,751
2.86
9,600
33
71,925
4.05
14,360
8
78,797
3.35
9,600
34
29,372
4.01
9,540
9
59,856
3.45
9,600
35
21,710
3.68
7,250
10
23,696
3.25
6,250
36
37,833
3.62
4,280
11
61,385
3.21
4,780
37
41,154
3.57
13,800
12
63,750
3.02
6,770
38
50,925
3.65
15,300
13
60,996
3.16
6,325
39
57,657
3.89
5,250
14
84,276
2.95
9,655
40
52,036
3.86
7,650
15
54,222
2.65
10,450
41
58,677
3.95
6,650
16
58,131
3.24
9,750
42
73,902
3.91
9,850
17
55,398
3.55
11,500
43
55,327
3.88
8,350
18
69,943
3.75
8,975
44
16,262
4.12
10,250
19
79,785
3.85
8,975
45
38,348
3.94
16,450
20
38,892
3.76
6,755
46
29,810
4.15
13,200
21
43,240
3.65
5,500
47
69,613
4.12
14,600
22
52,078
3.58
4,365
48
45,822
4.16
13,250
23
11,321
3.78
9,525
49
43,207
4.00
18,450
24
73,113
3.75
18,600
50
81,998
3.93
16,500
25
79,988
3.22
14,450
51
46,756
3.89
6,500
26
98,311
3.42
15,500
52
34,592
3.83
5,650
Using the data below, I need answers to the following questions:
a) Using the data in Table 1, specify a linear functional form for the demand for Combination 1 meals, and run a regression to estimate the demand for Combo 1meals.
b) Using statistical software (Excel), estimate the parameters of the empirical demand function specifiedin part a.Write your estimated industry demand equation.
c) Evaluate your regression results by examining signs of parameters, p-values, and the R2.
d) Discuss how the estimation of demand might beimproved.
e) If the owner plans to charge a price of 4.15 for a Combination 1 meal and spend $18,000 per week on advertising, how many Combination 1 meals do you predict will be sold each week?
f) If the owner spends $18,000 per week on advertising, write the equation for the inverse demand function. Then, calculate the demand price for 50,000 Combination meals.
Estimation and Analysis of Demand for Fast Food Meals
You work for PriceWatermanCoopers as a market analyst. PWC has been hired by the owner of two Burger King restaurants located in a suburban Atlanta market area to study the demand for its basic hamburger meal packageâreferred to as âCombination 1" on its menus. The two restaurants face competition in the Atlanta suburb from five other hamburger restaurants (three MacDonaldâs and two Wendyâs restaurants) and three other restaurants serving âdrive-throughâ fast food (a Taco Bell, a Kentucky Fried Chicken, and a small family-owned Chinese restaurant).
The owner of the two Burger King restaurants provides PWC with the data shown in Table 1. Q is the total number of Combination 1 meals sold at both locations during each week in 1998. P is the average price charged for a Combination 1 meal at the two locations. [Prices are identical at the two Burger King locations.] Every week the Burger King owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. A is the dollar amount spent on newspaper ads for each week in 1998. The owner could not provide PWC with data on prices charged by other competing restaurants during 1998. For the one-year time period of the study, household income and population in the suburb did not change enough to warrant inclusion in the demand analysis.
TABLE 1: Weekly Sales Data for Combination 1 Meals (1998)
week Q P A week Q P A
| 1 | 51,345 | 2.78 | 4,280 | 27 | 78,953 | 2.27 | 21,225 |
| 2 | 50,337 | 2.35 | 3,875 | 28 | 52,875 | 3.78 | 7,580 |
| 3 | 86,732 | 3.22 | 12,360 | 29 | 81,263 | 3.95 | 4,175 |
| 4 | 118,117 | 1.85 | 19,250 | 30 | 67,260 | 3.52 | 4,365 |
| 5 | 48,024 | 2.65 | 6,450 | 31 | 83,323 | 3.45 | 12,250 |
| 6 | 97,375 | 2.95 | 8,750 | 32 | 68,322 | 3.92 | 11,850 |
| 7 | 75,751 | 2.86 | 9,600 | 33 | 71,925 | 4.05 | 14,360 |
| 8 | 78,797 | 3.35 | 9,600 | 34 | 29,372 | 4.01 | 9,540 |
| 9 | 59,856 | 3.45 | 9,600 | 35 | 21,710 | 3.68 | 7,250 |
| 10 | 23,696 | 3.25 | 6,250 | 36 | 37,833 | 3.62 | 4,280 |
| 11 | 61,385 | 3.21 | 4,780 | 37 | 41,154 | 3.57 | 13,800 |
| 12 | 63,750 | 3.02 | 6,770 | 38 | 50,925 | 3.65 | 15,300 |
| 13 | 60,996 | 3.16 | 6,325 | 39 | 57,657 | 3.89 | 5,250 |
| 14 | 84,276 | 2.95 | 9,655 | 40 | 52,036 | 3.86 | 7,650 |
| 15 | 54,222 | 2.65 | 10,450 | 41 | 58,677 | 3.95 | 6,650 |
| 16 | 58,131 | 3.24 | 9,750 | 42 | 73,902 | 3.91 | 9,850 |
| 17 | 55,398 | 3.55 | 11,500 | 43 | 55,327 | 3.88 | 8,350 |
| 18 | 69,943 | 3.75 | 8,975 | 44 | 16,262 | 4.12 | 10,250 |
| 19 | 79,785 | 3.85 | 8,975 | 45 | 38,348 | 3.94 | 16,450 |
| 20 | 38,892 | 3.76 | 6,755 | 46 | 29,810 | 4.15 | 13,200 |
| 21 | 43,240 | 3.65 | 5,500 | 47 | 69,613 | 4.12 | 14,600 |
| 22 | 52,078 | 3.58 | 4,365 | 48 | 45,822 | 4.16 | 13,250 |
| 23 | 11,321 | 3.78 | 9,525 | 49 | 43,207 | 4.00 | 18,450 |
| 24 | 73,113 | 3.75 | 18,600 | 50 | 81,998 | 3.93 | 16,500 |
| 25 | 79,988 | 3.22 | 14,450 | 51 | 46,756 | 3.89 | 6,500 |
| 26 | 98,311 | 3.42 | 15,500 | 52 | 34,592 | 3.83 | 5,650 |
