Analyze the demand function for Cuisine Tech Inc.’s (CTI) deluxe microwave ovens
ID: 2440190 • Letter: A
Question
Analyze the demand function for Cuisine Tech Inc.’s (CTI) deluxe microwave ovens given on page 170. Please also read “What is a Symbol” located in the folder with this assignment.
Qh= 60,000-40Ph+20Pc+ 5H +.10Ih+.0001Ah
Qh: annual sales( # of units) of the deluxe model Ph: price of the deluxe model Pc: price of competing brand oven H: # of two-income household ( in millions) in this income bracket Ih= average annual income of household in this bracket Ah= annual expenditures on advertising for high priced model
Ph= $750 Pc=$625 H= 10 Ih= $56,000 Ah=$500,000 Qh=$48,200
Ql= 20900-100Pl + .5H+ .71Il
Ql- annual sales(number of units)of the lower priced model Pl-price of lower priced model H-number of 2-earner households (in 1000s) that are in these income brackets Il- average of annual income of households in the target income range.
1. Characterize this function by circling all in the following list that are applicable:
univariate, bivariate, bivariate, linear, exponential, logarithmic, curvilinear, 1st degree, 2nd degree, 3rd degree, additive, multiplicative, linearly homogeneous
2. What is the numerical value of the partial derivative of the function with respect to the price of a competing brand (Pc) ?(be sure to also include the + or – sign. Note: I do not want the symbol for this partial derivative)?
3. Write the mathematical symbol representing the coefficient of Advertising expenditures (A)? (the numerical value of this coefficient is +0.0001, but the answer you give is to be the symbol representing this partial derivative).
4. Assuming there is a $100 decrease in the price of Cuisine Tech’s ovens (PH), what will be the direction and the amount of the change in the quantity demanded (QH)? (give the numerical value of it, too)?
5. Are CTI ovens a normal or an inferior good? What feature of the function tells you? Normal,
6. Explain in words what the intercept (which is 60000) includes or does not include.
7. Assuming the average annual family income of CTI customers (IH) decreases by $1000, how will the demand for CTI ovens change (give the numerical value of it, too)?
8. Assuming your advertising expenditures are decreased by $500000, how will the demand for CTI ovens change (give the numerical value of it, too)?
9. If the number of two income households (H) doubles from 5 million to 10 million, what change in demand for Cuisine Tech ovens will there be (give the direction and numerical value of the change)?
10. What one variable in the Cuisine Tech demand function CANNOT cause a change in demand because a change in it will cause a change in the quantity demanded. of oven.?
Analyze the demand function for Cuisine Tech Inc.’s (CTI) deluxe microwave ovens given on page 170. Please also read “What is a Symbol” located in the folder with this assignment.
Qh= 60,000-40Ph+20Pc+ 5H +.10Ih+.0001Ah
Qh: annual sales( # of units) of the deluxe model Ph: price of the deluxe model Pc: price of competing brand oven H: # of two-income household ( in millions) in this income bracket Ih= average annual income of household in this bracket Ah= annual expenditures on advertising for high priced model
Ph= $750 Pc=$625 H= 10 Ih= $56,000 Ah=$500,000 Qh=$48,200
Ql= 20900-100Pl + .5H+ .71Il
Ql- annual sales(number of units)of the lower priced model Pl-price of lower priced model H-number of 2-earner households (in 1000s) that are in these income brackets Il- average of annual income of households in the target income range.
1. Characterize this function by circling all in the following list that are applicable:
univariate, bivariate, bivariate, linear, exponential, logarithmic, curvilinear, 1st degree, 2nd degree, 3rd degree, additive, multiplicative, linearly homogeneous
2. What is the numerical value of the partial derivative of the function with respect to the price of a competing brand (Pc) ?(be sure to also include the + or – sign. Note: I do not want the symbol for this partial derivative)?
3. Write the mathematical symbol representing the coefficient of Advertising expenditures (A)? (the numerical value of this coefficient is +0.0001, but the answer you give is to be the symbol representing this partial derivative).
4. Assuming there is a $100 decrease in the price of Cuisine Tech’s ovens (PH), what will be the direction and the amount of the change in the quantity demanded (QH)? (give the numerical value of it, too)?
5. Are CTI ovens a normal or an inferior good? What feature of the function tells you? Normal,
6. Explain in words what the intercept (which is 60000) includes or does not include.
7. Assuming the average annual family income of CTI customers (IH) decreases by $1000, how will the demand for CTI ovens change (give the numerical value of it, too)?
8. Assuming your advertising expenditures are decreased by $500000, how will the demand for CTI ovens change (give the numerical value of it, too)?
9. If the number of two income households (H) doubles from 5 million to 10 million, what change in demand for Cuisine Tech ovens will there be (give the direction and numerical value of the change)?
10. What one variable in the Cuisine Tech demand function CANNOT cause a change in demand because a change in it will cause a change in the quantity demanded. of oven.?
Analyze the demand function for Cuisine Tech Inc.’s (CTI) deluxe microwave ovens given on page 170. Please also read “What is a Symbol” located in the folder with this assignment.
Qh= 60,000-40Ph+20Pc+ 5H +.10Ih+.0001Ah
Qh: annual sales( # of units) of the deluxe model Ph: price of the deluxe model Pc: price of competing brand oven H: # of two-income household ( in millions) in this income bracket Ih= average annual income of household in this bracket Ah= annual expenditures on advertising for high priced model
Ph= $750 Pc=$625 H= 10 Ih= $56,000 Ah=$500,000 Qh=$48,200
Ql= 20900-100Pl + .5H+ .71Il
Ql- annual sales(number of units)of the lower priced model Pl-price of lower priced model H-number of 2-earner households (in 1000s) that are in these income brackets Il- average of annual income of households in the target income range.
1. Characterize this function by circling all in the following list that are applicable:
univariate, bivariate, bivariate, linear, exponential, logarithmic, curvilinear, 1st degree, 2nd degree, 3rd degree, additive, multiplicative, linearly homogeneous
2. What is the numerical value of the partial derivative of the function with respect to the price of a competing brand (Pc) ?(be sure to also include the + or – sign. Note: I do not want the symbol for this partial derivative)?
3. Write the mathematical symbol representing the coefficient of Advertising expenditures (A)? (the numerical value of this coefficient is +0.0001, but the answer you give is to be the symbol representing this partial derivative).
4. Assuming there is a $100 decrease in the price of Cuisine Tech’s ovens (PH), what will be the direction and the amount of the change in the quantity demanded (QH)? (give the numerical value of it, too)?
5. Are CTI ovens a normal or an inferior good? What feature of the function tells you? Normal,
6. Explain in words what the intercept (which is 60000) includes or does not include.
7. Assuming the average annual family income of CTI customers (IH) decreases by $1000, how will the demand for CTI ovens change (give the numerical value of it, too)?
8. Assuming your advertising expenditures are decreased by $500000, how will the demand for CTI ovens change (give the numerical value of it, too)?
9. If the number of two income households (H) doubles from 5 million to 10 million, what change in demand for Cuisine Tech ovens will there be (give the direction and numerical value of the change)?
10. What one variable in the Cuisine Tech demand function CANNOT cause a change in demand because a change in it will cause a change in the quantity demanded. of oven.?
Explanation / Answer
1) Multivariate; linear; 1st degree; Addictive
Given function contains more than two variable so it is multivariate. Function does not involve any log function or exponential so it is a linear function.
2) Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
dQh/dIh = + .10
So, numerical value is 0.10
3) Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
dQh/dH = 5
4) Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + 5(H + 1) + .10Ih + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + 5H + 5 + .10Ih + .0001Ah
Qh' = Qh + 5
So, demand for CTI increases by 5.
5. Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
Increase in income i.e. Ih, causes increase in demand of Qh. This implies CTI ovens are normal good.
6) 60,000 shows that annual sales of deluxe model will be at least 60,000 irrespective of price of good, price of related good, income of consumer or other factor.
7) Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + 5H + .10(Ih - 1000) + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + 5H + .10Ih - 10 + .0001Ah
Qh' = Qh - 10
Demand for CTI ovens decreases by 10.
8. Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001(Ah - 500,000)
Qh' = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah - 50
Qh' = Qh - 50
Demand for CTI oven decreases by 50.
9) Qh = 60,000 - 40 Ph + 20Pc + 5H + .10Ih + .0001Ah
Qh' = 60,000 - 40 Ph + 20Pc + (5H + 5H) + .10Ih + .0001Ah
Qh' = Qh + 5H
This implies there is positive change for Cuisine Tech ovens and it increases by 5 million.
10) Ph, price of deluxe model causes no change in demand. Change in price of factors other than the price of commodity itself causes change in demand.