Demand Estimation (Use Microfit 5.5 program)
Demand Estimation: The Case of Kebab House Question: You work for Kebab House as a market analyst. Kebab House has been hired by the owner of two Kebab houses located in a suburban of Nicosia market area to study the demand for its basic hamburger meal package-referred to as zkkm kebab" on its menus. The two restaurants face competition in the Nicosia suburb from five other Kebab houses (three Ebish and two Hamish kebab houses) and three other kebab houses serving "take away" fast food (Yedakorkma kebab, Kermiya kebab, and Kochino kebab). The owner of the two Kebab Houses provides Kebab House with the data shown in Table 1. QN is the total number of "zkkm kebab " sold at both locations during each week in 2019. PR is the average price charged for a "zkkm kebab " at the two locations. (Prices are identical at the two Burger restaurant locations. Every week the Burger restaurant owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. AD is the dollar amount spent on newspaper ads for each week in 2019. The owner could not provide Kebab House with data on prices charged by other competing restaurants during 2019. 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. (a) Introduction (Also i.e., Brief information about the case using the relevant literature should be provided) (b) An explanation of the model and the methodology used (i.e. see the following questions should be addressed'). (c) Display your estimated outputs using tables and graphs. (d) A discussion of the results estimated. Any other comments you feel relevant to the issues being addressed. (f) Conclusion and recommendations. Table 1: Kebab House Obs QN PRAD Obs QN PRAD 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 86,7323,22 12,360 29 81,263|3,95 4,175 4 118,117 1,85 19,250 3067,260 3,52|4,365 5 48,024 2,656,450 31 83,323|3,4512,250 6 97,3752,95 8,750 3268,322 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 59,8563,45|9,600 35 21,710 3,68|7,250 10 23,696 3,256,250 36|37,833|3,62 4,280 11 61,385 3,21 4,780 37|41,1543,5713,800 12 63,750 3,02 6.770 38|50,925 3,65 15,300 13 60,996 (3,166,325 39 57.657 3,895,250 14 84,276 2.95|9,655 40 52,036|3,867,650 15 54,222 2,65|10,450 4158,6773,95 6,650 16 58,131 3,249,750 42/73,902 3,91 9.850 17 55,398 3,55 11,500 43 55,327 3,888,350 18 69,943 3,75 8,975 44|16,262 4,12 10.250 1979,785 3,858,975 45 38,348|3,94 16,450 20 38,892 3.766,755 46 29,810 4,15 13,200 21 43,240 3,655,500 47 69,613 4,1214,600 22 52,078 3,58|4,365 48|45,822 4,1613,250 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 3,896,500 26 98,311 3,42 15,500 52 34,592 3,835,650 The following questions should be addressed 1. Using the data set in Table 1: specify a linear functional form for the demand for "zkkm kebab". 2. Based on the variables in the demand equation, estimate both the descriptive statistics and the correlation matrix. 3. Create the natural log of the existing variables (LQN, LPR, and LAD). Also create a constant and time trend by giving c and t respectively. 4. Run a regression to estimate the demand for "zkkim kebab" by conducting OLS for long run (Analyze the estimated coefficienst t-test, Fetest. RR diagnostic test results etc) 5. Find the short-run demand effects of the equation. Hint: DLQN=C+b, DLPR+D, DLAD+ e. (Analyze the estimated coefficients, t-test F-test. Rsg. R bar sa diagnostic test results otc). 6. Using the estimated demand equation's results, calculate own-price elasticity and an advertising elasticity. (Hint: It can be estimated by using nonlinear form, long run form and Dynamic form) (use also the relevant formula of Elasticity), 7. If the owner plans to charge a price of $4.15 for a "zkkim kebab " and spend $18,000 per week on advertising, how many "zkkm kebab" do you predict will be sold each week? 8. 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 "zkkm kebab Demand Estimation: The Case of Kebab House Question: You work for Kebab House as a market analyst. Kebab House has been hired by the owner of two Kebab houses located in a suburban of Nicosia market area to study the demand for its basic hamburger meal package-referred to as zkkm kebab" on its menus. The two restaurants face competition in the Nicosia suburb from five other Kebab houses (three Ebish and two Hamish kebab houses) and three other kebab houses serving "take away" fast food (Yedakorkma kebab, Kermiya kebab, and Kochino kebab). The owner of the two Kebab Houses provides Kebab House with the data shown in Table 1. QN is the total number of "zkkm kebab " sold at both locations during each week in 2019. PR is the average price charged for a "zkkm kebab " at the two locations. (Prices are identical at the two Burger restaurant locations. Every week the Burger restaurant owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. AD is the dollar amount spent on newspaper ads for each week in 2019. The owner could not provide Kebab House with data on prices charged by other competing restaurants during 2019. 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. (a) Introduction (Also i.e., Brief information about the case using the relevant literature should be provided) (b) An explanation of the model and the methodology used (i.e. see the following questions should be addressed'). (c) Display your estimated outputs using tables and graphs. (d) A discussion of the results estimated. Any other comments you feel relevant to the issues being addressed. (f) Conclusion and recommendations. Table 1: Kebab House Obs QN PRAD Obs QN PRAD 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 86,7323,22 12,360 29 81,263|3,95 4,175 4 118,117 1,85 19,250 3067,260 3,52|4,365 5 48,024 2,656,450 31 83,323|3,4512,250 6 97,3752,95 8,750 3268,322 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 59,8563,45|9,600 35 21,710 3,68|7,250 10 23,696 3,256,250 36|37,833|3,62 4,280 11 61,385 3,21 4,780 37|41,1543,5713,800 12 63,750 3,02 6.770 38|50,925 3,65 15,300 13 60,996 (3,166,325 39 57.657 3,895,250 14 84,276 2.95|9,655 40 52,036|3,867,650 15 54,222 2,65|10,450 4158,6773,95 6,650 16 58,131 3,249,750 42/73,902 3,91 9.850 17 55,398 3,55 11,500 43 55,327 3,888,350 18 69,943 3,75 8,975 44|16,262 4,12 10.250 1979,785 3,858,975 45 38,348|3,94 16,450 20 38,892 3.766,755 46 29,810 4,15 13,200 21 43,240 3,655,500 47 69,613 4,1214,600 22 52,078 3,58|4,365 48|45,822 4,1613,250 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 3,896,500 26 98,311 3,42 15,500 52 34,592 3,835,650 The following questions should be addressed 1. Using the data set in Table 1: specify a linear functional form for the demand for "zkkm kebab". 2. Based on the variables in the demand equation, estimate both the descriptive statistics and the correlation matrix. 3. Create the natural log of the existing variables (LQN, LPR, and LAD). Also create a constant and time trend by giving c and t respectively. 4. Run a regression to estimate the demand for "zkkim kebab" by conducting OLS for long run (Analyze the estimated coefficienst t-test, Fetest. RR diagnostic test results etc) 5. Find the short-run demand effects of the equation. Hint: DLQN=C+b, DLPR+D, DLAD+ e. (Analyze the estimated coefficients, t-test F-test. Rsg. R bar sa diagnostic test results otc). 6. Using the estimated demand equation's results, calculate own-price elasticity and an advertising elasticity. (Hint: It can be estimated by using nonlinear form, long run form and Dynamic form) (use also the relevant formula of Elasticity), 7. If the owner plans to charge a price of $4.15 for a "zkkim kebab " and spend $18,000 per week on advertising, how many "zkkm kebab" do you predict will be sold each week? 8. 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 "zkkm kebab
