Computing Price Elasticities (and optimal prices) Using the data posted on the class website (rfj_data

Computing Price Elasticities (and optimal prices)
Using the data posted on the class website (rfj_data.xls) run three simple regressions of the following
type
?? % = ?? + ???? % + ?? %
for each of the three brands in the data (Tropicana, Minute Maid and Private label).
(a) Using the regression results, compute own price elasticity at (average P, average Q) for each brand.
Price elasticity, ??, can be expressed as:
?? =
????
????
??
??
(b) Assume that the per unit cost of producing an additional unit is the same across brands and is 1 cent
per ounce. Based on the data provided and the estimated demand equation from above, compute the
optimal price for each brand.
Using a maximum of one page describe how you went about answering questions (a) and (b) and
comment on your findings.