EC140 Lecture Notes - Lecture 1: Lectionary
Get access
Related Documents
Related Questions
A food company has recently introduced a new line of fruit pies in 6 US cities: Atlanta, Baltimore, Chicago, Denver, St. Louis, and Fort Lauderdale. Based on the pies apparent success, the company is considering a nationwide launch. Before doing so, it has decided to use data collected during a two-year market test to guide it in setting prices and forecasting future demand.
For each of the 6 markets, the firm has collected eight quarters of data for a total of 48 observations. Each observation consists of data on quantity demanded (number f pies purchased per week), the price per pie, a competitor's average price per pie, income, and population. The company has also included a time-trend variable. A value of 1 denotes the 1st quarter observation, 2 the 2nd quarter, and so on, up to 8 for the 8th and last quarter.
A company forecaster has run a regression on the data, obtaining the results displayed in the accompanying table.
Ā | Coefficient | Stand. Error of Coefficient | Mean Value of Variable | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Intercept | -4,516.3 | 4,988.2 | ------ | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Price ($) | -3,590.6 | 702.8 | 7.5 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Competitors'price($) | 4,226.5 | 851 | 6.5 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Income ($000) | 777.1 | 66.4 | 40 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Population (000) | 0.40 | 0.31 | 2,300 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
Time (1 to 8) | 356.1 | 92.3 | ------ | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
N = 48 | R^2 = 0.93 | Standard error regression = 1,442 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
C.) Other things equal, how much do we expect sales to grow (or fall) over the next year?
D.) How accurate is the regression equation in predicting sales new quarter? Two years from now? Why might these answers differ?
E.) How confident are you about applying these test-market results to decisions concerning national pricing strategies for pies?