Hanna Corporation Essay

754 Words4 Pages
1. Hanna Corporation markets a compact microwave oven. In 2010 they sold 23,000 units at $375 each. Per capita disposable income in 2010 was $6,750. Hanna economists have determined that the arc price elasticity for this microwave oven is 1.2. (a) | In 2011 Hanna is planning to lower the price of the microwave oven to $325. Forecast sales volume for 2011 assuming that all other things remain equal. | (b) | However, in checking with government economists, Hanna finds that per capita disposable income is expected to rise to $7,000 in 2011. In the past the company has observed an arc income elasticity of +2.5 for microwave ovens. Forecast 2011 sales given that the price is reduces to $325 and that per capita disposable income increases to $7,000. Assume that the price and income effects are independent and additive. | 2. Lenny's, a national restaurant chain, conducted a study of the factors affecting demand (sales). The following variables were defined and measured for a random sample of 30 of its restaurants: Y | = Annual restaurant sales ($000) | X1 | = Disposable personal income (per capita) of residents within 5 mile radius | X2 | = License to sell beer/wine (0 = No, 1 = Yes) | X3 | = Location (within one-half mile of interstate highway--0 = No, 1 = Yes) | X4 | = Population (within 5 mile radius) | X5 | = Number of competing restaurants within 2 mile radius | The data were entered into a computerized regression program and the following results were obtained: MULTIPLE R | .889 | R-SQUARE | .79 | STD. ERROR OF EST. | .40 | ANALYSIS OF VARIANCE | | | | | | | DF | Sum Squares | Mean Sqr. | F-Stat | Regression | 5 | 326.13 | 65.226 | 18.17 | Error | 24 | 86.17 | 3.590 | | Total | 29 | 412.30 | | | Variable | Coefficient | Std. Error | T-Value | | | | | Constant | .363 | .196 | 1.852
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