# Eco 550 Week 3 Assignment

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Assignment 1: Making Decisions Based on Demand and Forecasting ECO 550 – Managerial Economics and Globalization Thursdays (6:00-10:00PM) November 24, 2013 The Pizza Company is considering entering the marketplace in your community. Using this output, we can derive estimated regression line for demand for pizza as; determine that Price (P) = \$175, Competitor Price (CP) = \$250, Advertisement (A) = \$325, Income (I) = \$95 Q= 128,832.2 – 19,876 * (P) + 15,467.94 * (CP) + 0.260701 * (A) + 8.780403 * (I) Q= 128,832.2 – 19,876 * 175 + 15,467.64 * 250 + 0.260701 * 325 + 8.780403 * 95 Q= 108,956.2 * 15,642.64 * 250.26 * 333.78 * 95 Q= 518,361.1 Coefficient of determination (or R- square) = 0.977914223. This means 97.79% of the variation…show more content…
By using the P-value to test the significance of the independent variables, you will notice that 2 of your independent variables are significance on the .05 level. (Price and Competitor Price). This is because they P-value are lower than .05. (Price = .0000554, competitor price = .000146656). Advertising is significant on the .10 level (AD = .010) In order to do the forecast, the Pizza Company would have to use this formula to calculate the four (4) periods. Y = 114643.899 – 18776.179(P) + 15990.395(Px) + 0.233(Ad) + 8.990(I). The Pizza Company Forecast | Pizza Sold | Period 1 | Period 2 | Period 3 | Period 4 | 616,178.15 | 4626119 | 45802950.7 | 339972197.2 | 3360704588 | 570,817.13 | 4396869 | 42469558.5 | 323110448.5 | 3115742237 | 609,111.50 | 4484901 | 45284541.8 | 329567595.7 | 3322221262 | 586,207.71 | 4590246 | 43598457.8 | 337294648.5 | 3198547002 | 556,023.52 | 4157422 | 41384447.2 | 305547008.1 | 3036149325 | 624,137.36 | 4357548 | 46380597.5 | 320226256.1 | 3402616948