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# Eco 550 Week 1 Chapters 1 and 2 Answers

Economics

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ECO 550 Week 1 Making Decisions Based on Demand and
Forecasting
Assignment 1: Making Decisions Based on Demand and Forecasting
ECO 550
Assignment 1: Making Decisions Based on Demand and Forecasting
Domino’s Pizza is considering entering the marketplace in your community. Conduct research about
the demographics of your community, for example the population size and average income per
household and other independent variables, such as price of pizza and price of soda, for this
assignment. By conducting a demand analysis and forecast for pizza, you will be able to make a
decision whether Domino’s should establish a presence in your community.
1. Report the demographic and independent variables that are relevant to complete a demand
analysis providing a rationale for the selection of the variables.
2. Using Excel or other calculation software, input the data you collected in criterion one to calculate
an estimated regression. Then, from the calculation provided, interpret the coefficient of
determination, indicating how it will influence your decision to open the pizza business. Explain any
additional variables that may improve the coefficient of determination.
3. Test the statistical significance of the variables and the regression equation, indicating how it will
4. Forecast the demand for pizza in your community for the next four (4) months using the regression
equation, including the assumptions that were used to create the demand. Justify the assumptions
5. Based on the forecasting demand, determine whether Dominos should establish a restaurant in
your community. Provide a rationale and support for the decision.
6. Cite at least two (2) different government sources for the demographic information you collected.
Assignment 1: Making Decisions Based on Demand and Forecasting
Page 1
I have been considering opening a Domino’s Pizza in my community
within the Virginia Beach area. In this paper I will present to you, a data
analysis and a forecast of Domino Pizza’s sales revenue that consist of
the demographics within my community. These demographics consist of
the population size, the average income per household and the
independent variables which include the price in pizza and soda. This
demand analysis will be used to give an estimated forecast that will

assist in my business making decision technique, which will determine if
it will be beneficial for me to open a Domino’s Pizza in my area.
To determine if I will enter into the market place in Virginia Beach, I will
research the reported demographic and independent variables that are
relevant to complete a demand analysis that has been provided to me
from different resources within my community. By using Excel to
calculate, I will input the data that I have collected to create an estimated
regression analysis. Once the calculation has been provided, I will be
able to interpret the coefficient of determination, and how it has provided
an influence on my decision to open the pizza business in my area.
Variables. The significant dependent variable (Y) that was used to create
this research was the pizza and soda sales revenue. This data was
taken from the last four years, which include 2008 through 2011. The
total sales revenue in the Virginia Beach area, for Domino’s Pizza, in
2008 was \$100,425, in 2009 the sales was \$100,404, in 2010 the sales
increased to \$100,571 and 2011 there was a slight increase of \$100,652.
Assignment 1: Making Decisions Based on Demand and Forecasting
Page 2
The independent variable (X) that was used in the research was the
average pizza and soda price along with the average income per
household and the population size within the Virginia Beach area. The
total price of the pizza in 2008 through 2010 was \$10.99 and the price
decrease in 2011 to \$5.99. The average income per household in 2008
was \$68,969 and declined in 2009 to \$59,298, which was right around
the time that in the economy started to decline. During 2010 and 2011
the average income increases slightly to \$65,910. The population size in
the Virginia Beach area in 2008 is 435,600 and dropped in 2009 to
434,700. In 2010 the population size increased to 437,994 and
continued to rise in 2011 to 442,707.
Forecast. The forecast demand for the pizza shop in my area for the
next four months using the regression equation and assumptions based
on the demands of Y = .025x + 99084.34 = 1. Based on the
assumptions of the regression equation it would be a good decision to
open up the pizza shop in my area. According to my calculations the
estimated forecast was determined by calculating:

Coefficient x Period x Intercept
Coefficient | Period | Intercept |
.025 | 5 | 99,084.47 |
.025 | 6 | 99,084.49 |
.025 | 7 | 99,084.52 |
.025 | 8 | 99,084.54 |
Assignment 1: Making Decisions Based on Demand and Forecasting
Page 3
The total revenue sales decreased by \$1,429.00 which is not a
substantial drop nor is it a major lost revenue sales, so I would definitely
would consider opening a pizza shop in my area. According to the
demographic data in the population size that was given by the local
census for my area, the population size continue to grow within yearly
which will have a major impact on the supply and demand which will
allow an assumption of an increased revenue in sales.
(city-data)
Assignment 1: Making Decisions Based on Demand and Forecasting
References:
city-data. (n.d.). Retrieved January 27, 2013 from city-data:
http://www.city-data.com
ycharts.com. (n.d.). Retrieved January 27, 2013 from ycharts.com:
http://ycharts.com/financials/DPZ/income_statement/annual