The relevant factors to be considered for modelling a demand function

ASSIGNMENT QUESTIONS

1. What are the relevant factors to be considered for modelling a demand function for Maa mustard oil? How is each factor related to elasticities of demand? How does the estimation of demand function incorporate the impact of each factor using the multiple regression technique?

2. Analyze the estimated demand function and calculate the elasticities of demand for Hind Oil Industries’ product. What do these calculations suggest about the effects of changes in each of these variables?

3. What would be the impact of a price change by HOI on the total revenue of Maa mustard oil, keeping other variables constant?

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4. What is the optimum price at which total revenue can be maximized for Maa mustard oil if the competitors’ prices do not increase in October 2015 (scenario l)? If competitors increase their prices by around 6 per cent, as suggested in the case (scenario 2), what would be the optimum price? Does the company benefit if competitors increase their prices? Perform all calculations under the assumption of no increase in promotional expenditure in the next month and a I-per-cent increase in the per capita income of consumers.

5. Plot a demand curve and a total revenue curve using the estimated values of quantity demanded from question 4. Analyze the findings of question 4 by using the concept of the total revenue test and the plotted graphs.