You are the owner of Bushveld Pizzas (Pty) Ltd in the new mall at Hazy View in Mpumalanga.

After your first year, you decided to do some research to determine what your expected weekly

sales (quantity demanded) will be in order to plan your cash flow. Your research consists of

three components:

A: From your till slips you gathered and captured the following data:

Every time you increased or reduced the average price of your pizzas by 10%, your

sales decreased or increased by 30%.

Irrespective of an increase or decrease in the price of your pizzas, sales on Fridays

were 500 units more compared to every other day of the week.

Every time that your only competitor in the mall, Greasy Hamburgers (Pty) Ltd,

increased (reduced) the price of its double hamburgers by 10%, your sales increased

(decreased) by 20%.

B. Every week you spend R1 000 on advertisements by placing flyers under the windscreen

wipers of the parked vehicles in the parking area of the mall. You realised that your sales

dropped by 10% during the weeks that you did not, but increased by 10% if you did

this again the following week.

C. From the answers to a questionnaire that you asked customers to fill in at the shop you

established that they increased their spending on pizzas by 0.05% per week for each 1%

increase in their disposable income. From their answers you also gathered that the average

weekly income of your customers is R6 000 per household.

You asked one of your part-time waitresses, who is a student in economics, to make regression

analysis of the data you gathered.

She found the following:

R2 = 0.65, n = 252, the standard deviation (SEC) for your price (P) = 1.5, that of income

(Y) = 0.02 and that of advertising (A) = 0.06. The t-value for the price of the competitor (Pc) = 4.

The current average price for a pizza is R90.00 and for a double Hamburger it is R80.00.

Required:

2.1. Determine the equation for expected pizza sales (Q). (3)

2.2. Calculate the expected weekly sales. (2)

2.3. Calculate the elasticities for the independent variables. (9)

2.4. What is the meaning of the elasticity values for P, Pc and Y? (3)

2.5. What is the meaning of R2 = 0.65 and n = 252? (2)

2.6. Calculate the t-values for the price of a pizza (P), income (Y) and advertising (A) and

explain their meaning. (6)

2.7. Calculate the standard deviation (SEC) for the price of a hamburger (Pc). (2)