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: Demand Estimation A. Market Characteristics & Demand estimation The price, quantity data provided in the data set is a reasonable approximation for the demand estimation of the product. However we are assuming that the other depending variables like advertising, substitutes are not affecting the demand schedule. Market structure is monopolistic in which many competing producers/retailers sell products/services which are differentiated from each other. In monopolistic competition, firms behave as monopolies in the short-run. Some of the characteristics of the retail industry in which Wal-Mart operates as follows. 1. Monopolistic market has many producers and consumers but no single market leader with influence over market price 2. Consumers choose the producers based on brand, advertising. 3. Producers still influence market price with relatively less entry and exit barriers. B. Linear vs Log-Linear Demand Curve Linear demand curve assume that changes in price, prices of complementary/supplementary goods, income, advertising and related factors will lead to a constant marginal effect. We assume linear demand curve within the given range of data. Since we assume that the effect of unit change in the independent variable will lead to a constant effect on demand in linear demand cure analysis. Hence changing elasticity is the basic assumption under a linear demand curve. In Log-linear demand curve we assume that there will be varying change in the demand due to unit change in the independent variable (price), but the elasticity of the demand is assumed to be constant. Constant elasticity is the basic assumption under a log-linear demand curve. Part 2: Regression Analysis Summary Table: Linear Demand Curve Regression Stat... ... middle of paper ... ...s and Statistics, 59 (3), 355-359. Christ, Carl F. (1985). Early Progress in Estimating Quantitative Economic Relationships in America. American Economic Review, 75 (6), 39-52. Eales, James S., & Unnevehr, Laurian J. (1988). Demand for Beef and Chicken Products: Separability and Structural Change. American Journal of Agricultural Economics, 71 (3), 521-532. Farnham, Paul G. ( 2005). Economics for Managers. Upper Saddle River. NJ: Pearson Education, Inc. Ferger, Wirth F. (1932). The Static and Dynamic in Statistical Demand Curves. Quarterly Journal of Economics, 47 (1), 36-62. Hirschey, Mark. (2006). Managerial Economics. Stamford CT: Thomson Higher Ed. McGuigan, James R., Moyer, R. Charles, & Harris, Frederick H.deB. (2005). Managerial Economics: Applications, Strategies, and Tactics with Economic Applications. Stamford CT: Thomson Higher Ed.
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