QUESTION 1

Syarikat Yuki conducted a market study on tis fish cake for a period of 35 weeks and the following is the estimated demand function for the fish cake:

Q =5,100 - 300P +150X+0.03A + 0.012Y

(6,000)(132)(78)(0.012)(0.003)

R²=0.875

Standard error of estimate=60

Q= quantity demanded for Yuki's fish cake.

P= per packet price of Yuki fish cake= RM8 per packet

X= price of an unidentified product= RM6

A= advertising expenditure of Syarikat Yuki= RM30,000

Y= average household income= RM5,000

Figures in parentheses indicate standard errors of coefficients.

a)Derive the conventional demand curve equation and calculate the estimated quantity demanded for Yuki's fish cake.

What is the range of sales volume that can be expected at the 95% confidence interval? (Given that t_{30. =0.05} = 2.042)

(4 marks)

b)How many percent of the variation in Q cannot be explained by the independent variables, P, X, A and Y? give one reason to explain why.

(2 marks)

c) Calculate the t-value for each of the independent variables. Comment on the results given that the critical t-value at 95% confidence interval is 2.042.

(4 marks)

d) Based on the existing values for all the independent variables, and given the marginal cost of producing one packet of Yuki's fish cake is RM5, what should be the profit-maximizing price for each packet of Yuki's fish cake?

(3 marks)

e) What impact would a 5% increase in income have on the demand for Yuki's fish cake? Compute your answer in terms of percentage and in terms of number of packets of fish cake.

(3 marks)

f) The sales manager informed the general manager that the current price of RM8 per packet of Yuki's fish cake is too low if the firm wants to maximize total revenue.

i) Do you agree with the sales manager?

Support your answer with calculations.

(2 marks)

ii) If the sales manager is correct, how much is the difference between the existing total revenue and the maximum total revenue?

(2 marks)