Easy Living Foods

Jun 17th, 2015
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Howard Payne University
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From the assignment provided, we can see that a regression has been run to estimate the demand function for low-calorie microwavable food.

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Easy Living FoodsCourse name:Course no.Date:Instructors name:From the assignment provided, we can see that a regression has been run to estimate the demand function for low-calorie microwavable food. The regression equation derived is QD = 20,000 - 10P + 1500A + 5PX + 10 I1) Since R2 is considerable high, the model explains the demand quite well. The advertisement elasticity calculated is 0.73 which means that advertisement plays an important role in determining the demand. Since advertisement has no role to play in a perfectly competitive market, we can rule out the possibility of the market being perfectly competitive. The market is also not a monopoly. This is because even monopoly doesnt require advertisement expenditure. The demand function also depends on the price of another product X which is in competition with the product discussed. This completely rules out the possibility that the market is a monopoly. Therefore the market is either an oligopoly market or a monopolistically competitive market. We know that advertisement plays an important role in a monopolistically competitive market. In an oligopoly market, advertisement is not no important. Besides this, another salient feature of a monopolistically competitive market is product differentiation. In our example, there are several firms producing low calorie microwavable foods. But each of the firms practices product differentiation. They slightly differentiate their product

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