1. Estimate the demand function for Checker's Pizza by completing the following steps:
• Open Excel.
• Download the “Checker's Pizza Data”file from eLearning, Session 4 Resources to your computer.
• Click “File” and "Open." Locate the downloaded Checkers Pizza data on your computer and open the data file.
• Click on the “Data” tab on the toolbar on the top.
• Select “Data Analysis” on the top, right. If you do not have the “Data Analysis” option, then you have not correctly installed the “Data Analysis” tool pack (see above).
• From the dropdown box choose “Regression”, then click OK.
• Select the “Y” or dependent variable of the model, which is “Q,” and highlight the array of data for “Q”
• Next, select the independent variables in the model “PAL, M INCOME, P, and PBMAC,” by highlighting that array of data. When selecting both the dependent and independent variables it is best to include the data labels Q, P, M, etc. in your arrays. Before proceeding with running the regression, click the label checkbox, if you included the labels in your data array.
• Unless otherwise specified, your output will go to a new worksheet. If you would like to keep the output on the same worksheet click on “Output Range” and specify the area you want the output to be placed.
• Click “OK.”
Your results should match those reported in the text on page 250. You should save your results page.
2. Calculate the following for Checker's Pizza:
Own price elasticity, income elasticity, and cross price elasticity for both Al’s Pizza and Big Macs. Evaluate each at the mean values of the data. Show how you calculated the elasticities, and report your values for each of the elasticities calculated.
You may obtain the mean values with Excel as follows:
• Open the “Checker's Pizza Data” file.
• Click on “Data” in the tool bar and then “Data Analysis”.
• Click on “Descriptive Statistics.” Select input range and highlight your data. It is best to include your labels in the array. Click the labels box, if you did include the labels. Also click the summary statistics box.
• Click “OK.” Save the output file, and print a copy of the output for submission.
To complete the following questions, you must use the output you generated and the elasticities you calculated in part 2.
3. If Checker's Pizza lowers its price by 20%, what will be the impact on pizzas sold?
4. Checker's management has seen a report indicating that consumer income will increase by 3% next year. What would be the percentage change in pizzas sold?
5. Which is a better substitute for Checker's Pizza, Al’s Pizza or Big Macs? Explain your answer.
6. If expectations for next year are that P, M INCOME, PAL, and PBMAC are all going to increase by 8%, by what percent would the demand for Checker's Pizza change? Use the elasticities you calculated in question 2 (above) to complete this question.
7. If the independent variables (P, M INCOME, PAL, and PBMAC) take on the values below, how many pizzas could Checker's expect to sell?
P = $12.50 M INCOME = $30,000
PAL = $11.00 PBMAC = $1.00
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Multiple R 0.9775
R Square 0.9555
Adjusted R Square 0.9461
Standard Error 42.4112
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