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SECTION A (COMPULSORY) Question 1 (a) AFB Company Lid is a company that was set up in June 2020 that produces an alcohol drink known BedRock Bitters

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SECTION A (COMPULSORY) Question 1 (a) AFB Company Lid is a company that was set up in June 2020 that produces an alcohol drink known BedRock Bitters. Among the competitors of your product are Alomo Bitters from Kasapreko Company Lid. As an expert in the marketing of alcoholic drinks, you have been poached from Kasapreko to oversee the marketing of this new product. In order for you to make informed decision and advise the board appropriately, you engaged an economist who estimated the demand equation for your firm's product. The economist used data from 857 consumers around the country for the month of January 2021 to estimate a linear regression for your product: Variable Parameter Estimates Standard error Intercept 204 20.2402 Price of BedRock Bitters per bottle (Px) -2.50 1.5534 Price of Alomo Bitters per bottle (Py) 1.25 0.2829 Per capita Income (I) -0.20 0.5212 Advertising (A) 0.06 0.0224 R-squared 0.9219 Adjusted R-squared 0.8947 F-statistic 7.8394 In addition, the economist also estimated the supply function for your product as: Q: = -85 + 5.5Px - 1.5PL + 0.05E where Pr is the price of BedRock Bitters per bottle, PL is the per unit price of unskilled labour, and E is litres of Ethanol used. Now suppose 2 bottles of BedRock Bitters is sold for GH$60, a bottle of Alomo Bitters is sold for GHe40, the per capita income of consumers is GH$800, the company spends GHc 1,000 on advertising, the per unit price of unskilled labour is GHe50, and a total of 1000 litres of ethanol was used for the production. i. Write down the estimated demand equation for your firm's product. 1 mark ii. Interpret the coefficient of price of BedRock Bitters and Price of Alomo Bitters. 1 mark iii. Determine the quantity of BedRock Bitters bought by consumers. 1 mark iv . Estimate the own price elasticity of demand and state the type of demand curve your firm has? 2 marks V. What would be the firm's price policy option? 1 mark vi. Assess the probable impact on your firm if the Kasapreko increases the price of Alomo Bitters by 15%. 2 marks Vii. What is the relationship between BedRock Bitters and Alomo Bitters? 1 mark viii. Find the demand and supply curves for BedRock Bitters. 2 marks ix. Determine the equilibrium price and quantity for BedRock Bitters. 2 marks