Problem 1 Two vending machines sit side by side in a college dorm. One machine s

Question

Problem 1 Two vending machines sit side by side in a college dorm. One machine sells Coke products and the other sells Pepsi products. The table gives the daily sales of Coke products S(c,p), measured in cans, when the price of Coke products is c dollars and the price of Pepsi products is p dollars. Cost of Coke Products (dollars) 0.50 0.75 1.00 1.25 1.50 0.50 157 143 123 98 5 0.75 206 192 172 4114 .00 225 241 221 195 163 1.25 30290 270 244 211 1.50 353 339 319 293 260 (a) To estimate sales of Coke products when the price of Coke products is S1.25 and the price of Pepsi products is $0.90, which variable should be held constant? (b) Will the cross section from part a be represented by a row or a column of the table? (c) Find a complete linear cross-sectional model and use it to estimate sales of Coke products when the price of Coke products is $1.25 and the price of Pepsi products is $0.90.

Explanation / Answer

To estimate the daily sales of coke products at price of 1.25$ when pepsi price is 0.90$ we need to identify the sales volume of coke at the price 0.90$. At this price there is no sales volume so we need to identify the sales volume by taking the mean of the sales at 0.75$ and 1.00$. So for estimating the sales at this price we need to keep the variables of 0.50$, 0.75$, 1.00$ and 1.50$ constant for coke products For pepsi products we need to keep the variables of 0.50$, 0.75$, 1.25$ and 1.50$ constant.

b) As the coke products sales are represented by rows while pepsi products sales by columns So the estimation results are represented by the row and approximately 172 cans will be sold out at this price.

c)

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