Demand and Regression Analysis

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Discussion Overview

The discussion revolves around a regression analysis related to the demand for Branded Products, Inc.'s Super Detergent, focusing on the implications of economic changes such as a recession, the impact of competitor pricing, and the interpretation of regression model outputs. Participants seek clarification on how to properly analyze and interpret the regression results in the context of market dynamics.

Discussion Character

  • Technical explanation
  • Debate/contested
  • Homework-related

Main Points Raised

  • One participant suggests that a recession would reduce disposable income, leading to a revenue reduction of 302.24, derived from t-test values, though this method is questioned by others.
  • Another participant agrees on the proportion of variation explained by the regression model, stating it is 91.47%.
  • Concerns are raised about the impact of competitor pricing on Branded Products' revenue, with a claim that any change in competitor price would affect revenue by 18%, but the basis for this claim is questioned.
  • A participant proposes a calculation for maintaining market share in response to a competitor's price decrease, but this method is also challenged regarding its assumptions about quantity changes.
  • There is uncertainty about the correct approach to using t-values and other statistical measures in the analysis, with requests for guidance on how to apply the regression outputs correctly.

Areas of Agreement / Disagreement

Participants generally express uncertainty and disagreement regarding the methods used to analyze the regression model and the implications of economic changes. No consensus is reached on the correct approach to answering the questions posed.

Contextual Notes

Participants highlight limitations in their understanding of regression analysis and the application of statistical measures such as t-tests and F-tests. There are unresolved questions about the assumptions underlying the calculations and the appropriateness of the methods used.

Who May Find This Useful

This discussion may be useful for students or individuals interested in regression analysis, market demand forecasting, and the interpretation of statistical models in economic contexts.

rr2013
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A bit confused with this question. my answers are below each question. please help.

Branded Products, Inc., based in Halfway Tree is a leading producer and marketer of household laundry detergent and bleach products. About a year ago, Branded products rolled out its new Super Detergent in four western parishes, following success in more limited test markets. At the time of introduction, management wondered whether the company could successfully crack this market, dominated by Breeze and other major players. The following regression model forecast results for Super Detergent over the past seven months (30 weeks). The t-statistics are in parenthesis.
Q = 867.98 – 81.86P + 0.007A + 0.006I + 82.86Px + 1.309T
(345) (24) (0.7) (0.2) (18) (0.063)
R2 = 91.47%, Standard of Error of the Estimate = 33.64 t(0.01, (n-k)df) = 2.492, F(k-1, n-k, 0.01) = 3.895
Q is the demand in cases, P is tile price (per case), Px is the competitor price, A is advertising expenditures (in thousands of dollars), I is disposable income per capita (in thousands of dollars) and T represent the month.
If P = $700.5, Px = $750 A= $350,000 I = $900,0001.What is the revenue implication for Branded Products, if there a recession? If there is a recession income will be affected(reduced) and this reduce revenue; a 302.24 reduction- (dervived from subtracting t-test values- 345-(24+.7+18+0-0.063)

2.What proportion of the variation in super detergent sales is explained by the regression model?
91.47%

3.Determine if Branded products should be concerned about its main competitors
yes any change in comptetirs price will affect barnded products revenue by 18%

4.If Branded Products wants to maintain at least its share of the market, what change in the price of their detergent will be necessary to compensate for a \$100 decrease in the price of its main competitors’ detergent?
$700-$700*18%=$574
 
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Welcome to MHB, rr2013! :)

rr2013 said:
A bit confused with this question. my answers are below each question. please help.

Branded Products, Inc., based in Halfway Tree is a leading producer and marketer of household laundry detergent and bleach products. About a year ago, Branded products rolled out its new Super Detergent in four western parishes, following success in more limited test markets. At the time of introduction, management wondered whether the company could successfully crack this market, dominated by Breeze and other major players. The following regression model forecast results for Super Detergent over the past seven months (30 weeks). The t-statistics are in parenthesis.
Q = 867.98 – 81.86P + 0.007A + 0.006I + 82.86Px + 1.309T
(345) (24) (0.7) (0.2) (18) (0.063)
R2 = 91.47%, Standard of Error of the Estimate = 33.64 t(0.01, (n-k)df) = 2.492, F(k-1, n-k, 0.01) = 3.895
Q is the demand in cases, P is tile price (per case), Px is the competitor price, A is advertising expenditures (in thousands of dollars), I is disposable income per capita (in thousands of dollars) and T represent the month.
If P = $700.5, Px = $750 A= $350,000 I = $900,0001.What is the revenue implication for Branded Products, if there a recession? If there is a recession income will be affected(reduced) and this reduce revenue; a 302.24 reduction- (dervived from subtracting t-test values- 345-(24+.7+18+0-0.063)

I'm not sure what you're doing here.
You can't use t-values this way.
It seems to me that to predict the impact of a recession, we wouldn't assume a change in our own price, nor the competitor's price, advertising expenditures, or the month.
We would assume a change in the disposable income per capita...

2.What proportion of the variation in super detergent sales is explained by the regression model?
91.47%

Right.

3.Determine if Branded products should be concerned about its main competitors
yes any change in comptetirs price will affect barnded products revenue by 18%

How did you get that?

4.If Branded Products wants to maintain at least its share of the market, what change in the price of their detergent will be necessary to compensate for a \$100 decrease in the price of its main competitors’ detergent?
$700-$700*18%=$574

How did you get that?

Maintaining the share of the market implies there should be no change in quantity.
That does not seem to be what you are doing.
 
Last edited:
I like Serena said:
Welcome to MHB, yaoming988! :)
I'm not sure what you're doing here.
You can't use t-values this way.
It seems to me that to predict the impact of a recession, we wouldn't assume a change in our own price, nor the competitor's price, advertising expenditures, or the month.
We would assume a change in the disposable income per capita...
Right.
How did you get that?
How did you get that?

Maintaining the share of the market implies there should be no change in quantity.
That does not seem to be what you are doing.

Quote - regarding question one I subtracted the t values of all the factors excluding income - i saw something similar done in an example online but I'm not certain I'm on the right track please guide me in answering this question.

thr truth is I'm sure i should be using the values given to answer the questions i.ethe t test, f test, rsquared etc but i do not know how to go about doing that. The examples we work in class are a lot simplier.

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rr2013 said:
Quote - regarding question one I subtracted the t values of all the factors excluding income - i saw something similar done in an example online but I'm not certain I'm on the right track please guide me in answering this question.

thr truth is I'm sure i should be using the values given to answer the questions i.ethe t test, f test, rsquared etc but i do not know how to go about doing that. The examples we work in class are a lot simplier.

can you please walk me through answering this question
 
rr2013 said:
can you please walk me through answering this question

Can you walk us through your answers?