# The Bluebird marketing department promptly emails you the historical pricing and quantity sold data for their potato chips. When you...

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The Bluebird marketing department promptly emails you the historical pricing and quantity sold data for their potato chips. When you open the spreadsheet you realize that your Excel file contains the following two columns of data:

• QUANTITY: Total weekly quantity demanded (sold) of Bluebird Potato Chips in New Zealand per week
• PRICE: Weekly price charged for one 150 gram bag of Bluebird Potato Chips
• In addition, you are informed that the variable costs for making each 150 gram bag of potato chips are \$0.40. Because we do not have access to the fixed costs data, assume fixed costs are zero (fixed costs are actually irrelevant when making pricing decisions because you have to pay them regardless of whether or not you decide to make and sell your potato chips.)

Q1 (20 Points): Produce a scatterplot in Excel by plotting QUANTITY on the Y-axis and PRICE on the X-axis. Then add a trend line and display the regression equation on your chart. Paste your chart below. Does your data appear to follow the Law of Demand? Why or why not?

Q2 (20 Points): Now run a regression in Excel by going to “Data”, “Data Analysis”, and “Regression”. Paste your regression coefficients for the Intercept and Price below and round to two decimal places. What is the interpretation of the regression coefficient for Price? Please be very specific in describing how it is related to quantity sold.

The regression of coefficient for price starts out negative which directly relates to the quantity sold because at first as the price goes up the amount of units sold decreases.

 Coefficients Intercept 772,653.41 PRICE -379,041.30

379041.30 x 393612.11 = 1.49e+11

Q4 (30 Points): Now using your cost data from above, 1) derive your equation for total costs (TC) in terms of price P, and 2) derive your profit equation in terms of price P, where

profit p = R – TC. How should you set your price in order to maximize profits? Show ALL of your work by clearly typing your formulas in Microsoft Word below. At your profit-maximizing price, what is your quantity demanded and what are your total profits? Round all answers to two decimal places (e.g. \$5.55). Again, please make sure to show all of your work, by clearly typing your calculations into Microsoft Word.

• Posted: 6 years ago
• Due:
• Budget: \$20