Problem: Managerial Economics
Part I
i. Using regression equation estimate the demand function for meals served in ordinary hotels in Nairobi. The data regarding price charged and number of meals served are as follows:
|
HOTEL
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
Price per meal in shs.
|
30
|
36
|
38
|
281
|
26
|
38
|
32
|
28
|
|
Meals served per day
|
200
|
180
|
170
|
220
|
240
|
180
|
210
|
200
|
Interpret the value of intercept term a and b-coefficient of the estimated regression equation
Y= a+bx
ii. Discuss the factors that are likely to limit the quality demand forecast
iii. Examine the practical importance of demand forecasting
iv. A seller of textile cloth wants to lower the price of its cloth from shs. 150 per metre to shs. 142.50 Per metre. If it's present, sales are 2000 metres per month and further it is estimated that its price elasticity of demand for the product is equal to 0.7. Show
o Whether or not his total revenue will increase as a result of his decision to lower the price and
o Calculate the exact magnitude of its new total revenue
Part II
i. Examine the causes of monopoly market structures
ii. Using well labelled diagrams illustrate and explain how equilibrium price and output are determined within the short run under monopoly
iii. Compare and contrast pure and perfect markets under the following sub-headings
o Demand curve facing the firm
o Optimum resource allocation
o Management decisions variables
iv. Describe the relationship between average variable cost and average product and between marginal cost and marginal product.
v. How is U-shape of average variable cost curve explained by the law of variable proportions
The response must include a reference list. One-inch margins, double-space, Using Times New Roman 12 pnt font and APA style of writing and citations.