128.5651267 1. If Checker’s Pizza lowers its price by 15%, what will be the impa

Question

128.5651267

1. If Checker’s Pizza lowers its price by 15%, what will be the impact on pizzas sold?

2. Checker’s management has seen a report indicating that consumer income will increase by 8% next year. What would be the percentage change in pizzas sold?

3. Which is a better substitute for Checker’s Pizza, Als Pizza or Big Macs? Explain your answer.

4. If expectations for next year are that P, M INCOME, PAL, and PBMAC are all going to increase by 5%, by what percent would the demand for Checker’s Pizza change? Use the elasticities you calculated in question 2 (above) to complete this question.

5. If the independent variables (P, M INCOME, PAL, and PBMAC) take on the values below, how many pizzas could Checker’s expect to sell? P = $11.50 M INCOME = $35, 000 P AL = $10.00 P BMAC = $3.00

SUMMARY OUTPUT Regression Statistics Multiple R 0.97747728 R Square 0.95546183 Adjusted R Square 0.94608538 Standard Error 42.4112273 Observations 24 ANOVA df SS MS F Significance F Regression 4 733155.8015 183288.9504 101.9000984 1.467E-12 Residual 19 34175.53183 1798.712201 Total 23 767331.3333 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 1183.80249 506.2980062 2.338153561 0.03046727 124.10858 2243.49639 124.108581 2243.496392 P -213.4219 13.48631686 -15.82506946 2.13823E-12 -241.64909 -185.19472 -241.649087 -185.1947155 M_INCOME 0.09108829 0.012409922 7.339956795 5.87592E-07 0.065114 0.11706255 0.06511402 0.117062553 PAL 101.302856 38.74776028 2.614418373 0.017051999 20.202862 182.402851 20.2028621 182.4028507 PBMAC 71.8447991 27.09970176 2.651128774 0.015762653 15.124471 128.565127 15.1244715

128.5651267

Explanation / Answer

Answer to question# 1)

Pizza sold = -213.4219 (Price) ....rest all the factors considered to be same or constant

Now if the price is reduced by 15%

Then New Pizza Sold = -213.4219 * (0.85) Price

.

Percent change in Pizza sold = (New pizza sold - Pizza sold) * 100 / Pizza sold

Percent change in Pizza sold = (-213.4219*0.85 * P - (-213.4219 * P) *100 / 213.4219 *P

Percent change in Pizza sold = (-0.85 + 1)*213.4219*P * 100 / 213.4219 * P

Percent change in Pizza sold = 0.15 *100 = 15%

.

Thus if the price decreases by 15% , the Pizza sold increases by 15%

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