likely reduce sales. No. income elasticity is relatively high, so a recession wo
ID: 1216104 • Letter: L
Question
likely reduce sales. No. income elasticity is relatively high, so a recession would not have a large impact on sales No. income elasticity is relatively low, so a recession would not have a large impact on sales What proportion of the variation in sales is explained by the independent variables in question 1? Office Enterprises (OE) produces a line of metal office file cabinets The company's economist, having investigated a large number of past data has established the following equation of demand for these cabinets Q = 10.000 + 608 - 100P + 50C where Q = Annual number of cabinets sold B = Index of non residents construction P = Average price per cabinet charged by OE C = Average price per cabinet charged by OE's closest competitor It is expected that next year is non residential construction index will stand at 160 OE's average price will be $40 and the competitor is average price will be $35 Forecast annual sates Enter your response as a whole number without the dollars sign. What will be the new sales forecast if the competitor lowers its price to $32? What will be the new sales forecast if OE reacts to the decrease mentioned in the previous question by lowering its price to $377 (The competitor's price will now be $32 and the firm's own price win be $37.) If the index forecast was wrong, and it turns out to be only 140 next year what will be OE's projected sales assuming the original price information of P = 540 and C = $35? Enter your answer as whole numbers.Explanation / Answer
(7)
Forecast sales = 10,000 + (60 x 160) - (100 x 40) + (50 x 35) = 10,000 + 9,600 - 4,000 + 1,750 = 17,350
(8)
New forecast sales = 10,000 + (60 x 160) - (100 x 40) + (50 x 32) = 10,000 + 9,600 - 4,000 + 1,600 = 17,200
(9)
New forecast sales = 10,000 + (60 x 160) - (100 x 37) + (50 x 32) = 10,000 + 9,600 - 3,700 + 1,600 = 17,500
(10)
Forecast sales = 10,000 + (60 x 140) - (100 x 40) + (50 x 35) = 10,000 + 8,400 - 4,000 + 1,750 = 16,150
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