Assignment 2 Operations Decision Due Week 6 and worth 300 points .docx

Assignment 2: Operations Decision Due Week 6 and worth 300
points
Using the regression results and the other computations from
Assignment 1, determine the market structure in which the low-
calorie food company operates.
Use the Internet to research two (2) of the leading competitors
in the low-calorie microwavable food industry, and take note of
their pricing strategies, profitability, and their relationships
within the industry (worldwide).
Write a six to eight (6-8) page paper in which you:
1. Outline a plan that will assess the effectiveness of the market
structure for the company’s operations.
2. Suppose the business operations have now changed from the
market structure specified in the scenario. Determine two (2)
likely factors that might have caused the change. Predict the
primary manner in which this change would likely impact
business operations in the new market environment.
3. Analyze the major short-run and long-run production and cost
functions for the low-calorie microwaveable food company.
Suggest substantive ways in which the low-calorie food
company may use this information in order to make decisions in
both the short-run and the long run.
4. Determine the possible circumstances under which the
company should discontinue operations. Suggest key actions
that management should take in order to confront these
circumstances. Provide a rationale for your response.
5. Suggest one (1) pricing policy that will enable your low-
calorie microwavable food company to maximize profits.
Provide a rationale for your suggestion.
6. Outline a plan, based on the information provided in the
scenario, that the company could use in order to evaluate its
financial performance. Consider all the key drivers of
performance, such as company profit or loss for both the short
term and long term, and the fundamental manner in which each

factor influences managerial decisions.
7. Recommend two (2) actions that the company could take in
order to improve its profitability and deliver more value to its
stakeholders. Outline, in brief, a plan to implement your
recommendations.
8. Use at least five (5) quality academic resources in this
assignment. Note: Wikipedia does not qualify as an academic
resource.
Your assignment must follow these formatting requirements:
• Be typed, double spaced, using Times New Roman font (size
12), with one-inch margins on all sides; citations and references
must follow APA or school-specific format. Check with your
professor for any additional instructions.
• Include a cover page containing the title of the assignment, the
student’s name, the professor’s name, the course title, and the
date. The cover page and the reference page are not included in
the required assignment page length.
The specific course learning outcomes associated with this
assignment are:
• Analyze short-run and long-run production and cost functions.
• Apply macroeconomic concepts to changes in global and
national economies and how they affect economic growth,
inflation, interest rates, and wage rates.
Evaluate the profit-maximizing price and output level for given
operating costs for monopolies and firms in competitive
industries.
• Use technology and information resources to research issues in
managerial economics and globalization.
• Write clearly and concisely about managerial economics and
globalization using proper writing mechanics.
Running head: DEMAND ESTIMATION
1
DEMAND ESTIMATION
10

Demand Estimation
Demand Estimation
Low-Calorie Microwavable Food Processing Company
This company is involved in making low-calorie microwavable
food. The company wants to ensure they maintain a continuous
good performance in the market. Therefore, it is essential to
estimate its demand, elasticity and project future performance.
The following is a demand equation for the product and a table
of its performance in 26 supermarkets nationwide.
Demand equation: p=0.5q+70
Table 1: Demand, Price and Elasticity in the 26 Supermarkets,
assume initial price and demand was 130 and 30 respectively.
Quantity (Independent variable)
%∆ in independent variable
Price (Dependent variable)
%∆ in dependent variable
Elasticity
1
25
16.66%
120
7.69%

0.46
2
27
8.00%
124
3.33%
0.42
3
29
7.41%
128
3.23%
0.44
4
30
3.45%
130
1.56%
0.45
5
31
3.33%
132
1.54%
0.46
6
32
3.23%
134
1.52%
0.47
7
34
6.25%
138
2.99%

0.48
8
35
3%
140
1.45%
0.49
9
30
-14%
130
-7.14%
0.50
10
30
0%
130
0.00%
0.00
11
40
33%
150
15.38%
0.46
12
45
13%
160
6.67%
0.53
13
40
-11%
150
-6.25%

0.56
14
35
-13%
140
-6.67%
0.53
15
34
-3%
138
-1.43%
0.50
16
40
18%
150
8.70%
0.49
17
45
13%
160
6.67%
0.53
18
50
11%
170
6.25%
0.56
19
52
4%
174
2.35%

0.59
20
50
-4%
170
-2.30%
0.60
21
45
-10%
160
-5.88%
0.59
22
48
7%
166
3.75%
0.56
23
50
4%
170
2.41%
0.58
24
52
4%
174
2.35%
0.59
25
54
4%
178
2.30%

0.60
26
58
7%
186
4.49%
0.61
The Production Company
2011
2012
2013
Total Revenue
$5,379,000,000
$5,341,000,000
$5,741,000,000
Units Produced
64,446,773
63,673,945
65,673,945
Price
$83.46
$83.88
$87.42

2001-2002
2002-2003
2001-2003
%Change in Quantity
-0.003016015
0.007731089
0.011565016
%Change in Price
0.001244
0.010322
0.010322
Elasticity Coefficient
2.425124846
0.748994536
1.12042869
Elasticity
-0.412349905
1.335123224
0.892515524
Implications of the Elasticities
The figures above depict the dominance of inelastic demand.
They give an impression of small change in demand in spite of
an observable change in price. Calculations were done

according to the formula provided above. I would recommend
that this firm should not cut the price to increase its market
shares as according to the elasticities figures, there is relatively
a small change in demand as a result of change in price (Barber,
2010).
Demand, Supply and Equilibrium Curves
Assume that the price changes are 100, 200, 300, 400, 500, 600
dollars.
Supply function Q = 5200 + 45P with the same prices.
Demand Curve
Quantity
Price
60
600
260
500
460
400
660
300
960
200
1060
100
quantity
price
9700
100
14200
200
18700
300
23200

400
27700
500
32200
600
Equilibrium Curve
Price S
Price D
Quantity
100
600
60
200
500
260
300
400
460
400
300
660
500
200
960
600
100
1060
Equilibrium quantity= 560
Equilibrium price= 350 dollars
Factors that could change the supply and demand for the

product
There is a number of prevailing factors that could possibly
change the supply and demand for the product. The most
common one is price increases or decreases. An incremental
decrease in product price leads to huge increase in the demand
for the product. On the other hand, an increase in the product
price leads to decrease in demand by a significant margin.
As population rises, more and more people become aware of the
product and therefore demand increases as a result. Due to this,
the company is forced to supply more quantities of the product
to satisfy the growing demand. They are not impressed in
supplying more products in the market at depressed prices.
Furthermore, available substitutes such as hot food supplies
affect the demand and supply of the product. A number of
people are able to acquire the same food products at restaurant
or being supplied by other competitive companies leading to a
drop in demand (Starr, 2011).
Consumer tastes and preferences affect the supply and demand
of goods and services in the market. Some consumers prefer
cooking their own food rather than buying packaged
microwavable food. Again, consumer trends may shift basing on
the fact that microwavable food is not safe.
Another cause could be recession and high rates of
unemployment. The recession is one good example of when and
how change starts occurring in supply and demand. In the
current recession that we are living in, people are losing their
jobs and so they have to find ways to economize and make
changes in the way they spend and what they purchase.
Consumers also take in mind what is needed the most and what
is considered a luxury or treat. People will often differentiate
between their needs and wants.

Under free market conditions, a negative shift in demand results
in lower quantities demanded and as such, suppliers are inclined
to reduce supply. A positive shift in demand leads to a rise in
quantities demanded and a positive shift in supply as suppliers
position themselves to take advantage of higher prices. As a
supplier, the lower the price, the less I will supply to the market
in a bid to push up prices when demand increases. With a rise in
demand, I would supply more units to the market so that I can
make more profits by charging more for the product (Palmer &
Ontario, 2006).
Competition from other substitutes should be contained by
reducing the price of the goods and commodities sold. This will
encourage consumers to opt for the cheaper commodity as
opposed to the alternatives in the market. The same principle
can be applied in situations where consumer tastes and
preferences change in favor of a rival product. It should be
noted that there is a minimum below which prices cannot be
reduced due to overheads and incidental costs like repair and
maintenance. In other instances, it may be prudent for the firm
to invest in products that the consumers prefer rather than
engage in expensive price wars.
Primary Manner In Which Both The Short-Term And The Long-
Term Changes In Market Conditions Could Impact The Demand
For, And The Supply Of The Product.
Short-term changes in the market include seasonal supply of
substitute commodity, seasonal product preferences, price
fluctuations, inflation in economy among others. The short-term
changes tend to create sharp increase or decrease in both
demand and supply seasonally but in overall the price or
demand deviation is maintained at manageable levels.
On the other hand long-term changes in the market would
involve customer shifting their trends permanently and adopting
the usage of another better product leading to decreased demand

and supply. Other factors that would play a great role in long-
term changes in the market include change in technology,
change of culture and lifestyle, change in economy among
others. A change in technology would mean that people will
cease to use the product as there are other better means of
utilizing the product or get totally replaced products. This
implies that demand will decrease substantially similarly to
supply as prices will tend to decrease discouraging the
suppliers. Change in feeding culture leads to permanent shift of
consumer trends leading to a decrease in demand and thus the
supply. In case the economic performance of a nation improves,
consumer tends to shift to higher preferences and tastes
lowering the demand and supply of the product (Palmer &
Ontario, 2006).
.
Crucial Factors That Could Cause Rightward Shifts of the
Demand and Supply Curves
The factors that lead to rightward shift include rise in income.
With increased income, consumers have extra or more money to
spend particularly on normal goods. Hence, the demand on the
product will increase despite of high prices offered.
Consequently supply will increase shifting both the curves of
demand and supply rightwards. Also when the price of
complement goes down and that of substitute goes up, demand
and supply curves will shift rightwards as more people tends to
prefer the product they can afford. Also the people preference
may make them to like a certain product hence causing an
increase in demand and thus the supply. This results in a
rightward shift of demand and supply curve. Other cases include
the situation where the consumer expect an increase in value of
the product, hence increasing demand and supply thus the
rightward shift. An increase in population too.

Crucial Factors That Could Cause Leftward Shifts of the
Demand and Supply Curves
A leftward shift is caused by a decrease in income. The
consumers have insufficient funds to spend and they spend the
little they have on inferior goods. The demand for the product
goes down. The suppliers are unwilling to supply more hence
the leftward shift for both cases. An increase in price will
discourage consumers from purchasing the product by causing
them to look for a cheap substitute; this causes the demand and
supply to decrease, consequently leading to a leftward shift.
Change in tastes also causes the leftward shift of the demand
and supply curves when the preference disfavors the product.
References
Barber, J. R. (2010). Elasticity. Dordrecht: Springer.
Palmer, J., Roseman, E., Murgatroyd, S., Films for the
Humanities (Firm), & TVOntario.
(2006). Supply and demand.
Princeton, NJ: Films for the Humanities and Sciences.
Starr, R. M. (2011). General equilibrium theory: An
introduction. New York: Cambridge
University Press.
2/22/2014 Rubric Detail
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Name: ECO550 We e k 3 Assignme nt 1: De mand Estimation
Description: ECO550 We e k 3 Assignme nt 1: De mand
Estimation
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Feedback:
Elasticity coefficients are incorrect. Ep = .79 Epx = .45 Epi =
1.07 Ea = 0.075 Em = 0.047
ECO550-A1-1
1. Compute the elasticities for each independent variable. Note:
Write down all of your calculations.
Weight: 15%
22.5(11.25%)
Unacceptable Below 70% F 0 (0%) - 20.98 (10.49%)
Fair 70-79% C 21 (10.5%) - 23.98 (11.99%)
Proficient 80-89% B 24 (12%) - 26.98 (13.49%)
Exemplary 90-100% A 27 (13.5%) - 30 (15%)
Feedback:
Product is inelastic given the coefficient.
ECO550-A1-2
2. Determine the implications for each of the computed

elasticities for the business in terms of short-
term and long-term pricing strategies. Provide a rationale in
which you cite your results.
Weight: 15%
22.5(11.25%)
Fair 70-79% C 21 (10.5%) - 23.98 (11.99%)
Proficient 80-89% B 24 (12%) - 26.98 (13.49%)
Exemplary 90-100% A 27 (13.5%) - 30 (15%)
Feedback:
Yes - increase in price will increase total revenue.
ECO550-A1-3
3. Recommend whether you believe that this firm should or
should not cut its price to increase its
market share. Provide support for your recommendation.
Weight: 10%
17(8.5%)
Fair 70-79% C 14 (7%) - 15.98 (7.99%)
Proficient 80-89% B 16 (8%) - 17.98 (8.99%)
Exemplary 90-100% A 18 (9%) - 20 (10%)
ECO550-A1-4
4a. Assume that all the factors affecting demand in this model

remain the same, but that the price
has changed. Further assume that the price changes are 100,
200, 300, 400, 500, 600 dollars. Plot the
demand curve for the firm. Weight: 5%
9.5(4.75%)
29800_1&course_id=_115473_1… 2/4
Feedback:
Good job.
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
Good job.
ECO550-A1-5
4b. Assume that all the factors affecting demand in this model
200, 300, 400, 500, 600 dollars. Plot the

corresponding supply curve on the same graph using the supply
function Q = 5200 + 45P with the
same prices. Weight: 5%
9.5(4.75%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
Good job.
ECO550-A1-6
4c. Assume that all the factors affecting demand in this model
200, 300, 400, 500, 600 dollars.
Determine the equilibrium price and quantity. Weight: 5%
9.5(4.75%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
Short run response is less than long run response.

ECO550-A1-7
4d. Assume that all the factors affecting demand in this model
200, 300, 400, 500, 600 dollars. Outline
the significant factors that could cause changes in supply and
demand for the product. Determine the
primary manner in which both the short-term and the long-term
changes in market conditions could
impact the demand for, and the supply, of the product. Weight:
10%
15(7.5%)
Fair 70-79% C 14 (7%) - 15.98 (7.99%)
Proficient 80-89% B 16 (8%) - 17.98 (8.99%)
Exemplary 90-100% A 18 (9%) - 20 (10%)
Feedback:
ECO550-A1-8
5. Indicate the crucial factors that could cause rightward shifts
and leftward shifts of the demand and
supply curves. Weight: 10%
17(8.5%)
Fair 70-79% C 14 (7%) - 15.98 (7.99%)

Proficient 80-89% B 16 (8%) - 17.98 (8.99%)
Exemplary 90-100% A 18 (9%) - 20 (10%)
29800_1&course_id=_115473_1… 3/4
Feedback:
Changes in Px, I, A, M, will shift dem and right or wrong, while
increase in technology will increase supply
and reduce price.
Feedback:
3 references
ECO550-A1-9
6. 3 references
Weight: 5%
8.5(4.25%)
Unacceptable Below 70% F 0 (0%) - 6 (3%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
ECO550-A1-10
7. Writing Mechanics, Grammar, and Formatting

Weight: 5%
9.5(4.75%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
Good job
ECO550-A1-11
8. Appropriate use of APA in-text citations and reference
section
Weight: 5%
9.5(4.75%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
Integration m ust correlate to questions. Good try.
ECO550-A1-12
9. Information Literacy / Integration of Sources
Weight: 5%

8.5(4.25%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
Feedback:
ECO550-A1-13
10. Clarity and Coherence of Writing
Weight: 5%
8.5(4.25%)
Fair 70-79% C 7 (3.5%) - 7.98 (3.99%)
Proficient 80-89% B 8 (4%) - 8.98 (4.49%)
Exemplary 90-100% A 9 (4.5%) - 10 (5%)
29800_1&course_id=_115473_1… 4/4
The rubric total value of 167.00 has been overridden with a

value of 170 out of 200.0.
Feedback:
Dem and equation is m issing, but num bers still show
downward sloping dem and curve.
Fe e dback
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Name:ECO550 We e k 3 Assignme nt 1: De mand Estimation
Description:ECO550 We e k 3 Assignme nt 1: De mand
Estimation
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Assignment 2 Operations Decision Due Week 6 and worth 300 points .docx

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