Question: FUN WITH REGRESSIONS (or "Dining with Big Suzy")

You have been retained by a regional food marketer, FoodKing , to forecast the demand

for small cakes that are mass-produced and marketed under the name Big Suzy’s Snack

Cakes . To assist with your analysis, you are provided with data that was collected for 8

consecutive quarters and 6 geographic markets. You are asked to address the following questions

1. Estimate a regression model that expresses sales as a function of price, income
   and competitor’s price and population? Once you have estimates the regression
   model, (a) provide a clear interpretation of the "R2" and (b) the statistical
   significant of the overall regression. Be sure to explain if the overall regression is
   statistically significant at a 5% level and how you know that.
2. Can you provide a clear, concise interpretation for the slope coefficient on price?
   Is that coefficient significantly different from zero? How do you know that?
3. Can you provide a clear, concise interpretation for the slope coefficient on
   income?
4. FoodKing is considering entering a new market. In this market, the population is
   2,550,000, the average (or per capita) income is $42,800 and the competitor’s
   product sells for $4.80. Using this regression model, if you price your product at
   $5.25, how many pies will you sell? SHOW YOUR WORK.
5. If you price your product at $5.25, what would be the price elasticity of demand
   for your product at that price? Is this elastic or inelastic? If you raised the price of
   the product by a very small amount, would the profit rise or fall?
6. At what price would you maximize the TOTAL REVENUE that the firm
   receives?
7. Assume that if your firm enters the market, is will be able to produce pies at a
   constant marginal cost of $3.25 per pie, at what price would it maximize
   PROFITS? Do you need to know the fixed cost to answer this question? What is
   the price elasticity of demand at that price?
8. One of your assistants notes that market that you are considering entering is

located in the southern part of the nation and asserts that "everyone knows that

southerners eat lots of snack cakes." You note that in your data set, Atlanta and

Dallas are the only two cities that are in the "South" census district. Can you test

you assistant’s hypothesis that "southerners eat lots of snack cakes" – is she

correct?

Price: $2.99

Solution: The downloadable solution consists of 8 pages
Deliverable: Word Document