Managerial Economics and Globalization free essay sample

This research is the direct result of Domino Pizza’s’ interest in entering the marketplace in our community. Conducting this demand analysis and forecast for pizza will aid in the decision as to whether or not Domino’s should establish a presence in our community. There are many variables relevant to a company’s major business decisions and success. Independent variables or experimental variables as they are sometimes called is the variable being manipulated in the experiment to show the effect on the dependent variable. The dependent variable also known as the response variable is the variable being observed in the experiment. A change in the independent variable is what causes the change if any in the dependent variable, which is the purpose of the experiment. Marketing departments use demographic variables like income level, gender, location, race, and family size, as an important input when formulating target customer profiles. Research for the demographics in this report were taken from the 2012 United States Census Bureau for Darlington, South Carolina and include average yearly income, total population and number of people per household. We will write a custom essay sample on Managerial Economics and Globalization or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The remaining variables for this report include pizza and soda costs. The data for this report is as follows; population: 68,139, number of people per household: 2. 56, average income per household: $38,567, price large meat lovers pizza -feeds approx. 3-4 people: $12. 10 after taxes, price per Sierra Mist 2L soda: $2. 5, number of households: 26,279 (United States Cesu Bureau, 2012). Using Excel or other calculation software, input the data you collected in criterion one to calculate an estimated regression. Then, from the calculation provided, interpret the coefficient of determination indicating how it will influence your decision to open the pizza business. The law of demand simply says that when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises. An increase in demand means that the demand curve will shift to the right. A decrease in the price of the product will not shift the demand curve, but will increase the quantity demanded (Henderson, 2008). The Coefficient of Determination Interpretation is the accuracy of the predictor of the independent variable on the dependent variable value. The coefficient of determination is calculated as the square of the correlation coefficient between the sample and predicted data. How well a regression model fits the data is shown through the coefficient of determination. The value of the coefficient of determination shows the percentage of variation that can be explained by the regression equation and is used to show how accurately a regression model can predict future outcomes (Mahvish Zehra, n. d. ). The interpretation of each independent variable coefficient is as following. There is a decrease in the demand for pizza. The coefficient of the cost of pizza is, – 3,174. 060 and the coefficient of the cost of soda is, -2,266. 36 this shows a negative impact on demand. Although small, the coefficient of total population . 579, and the average income per house hold of . 035 which shows that Average income per house hold has a positive impact on demand and as income increases the demand of pizza increases. No other variables are needed to improve the coefficient of determination. The coefficient of determination of the independent variables is almost 80pe cent and demonstrates the efficiency of the regression model and can be used to predict demand and future business decisions. Forecast the demand for pizza in your community for the next four months in your community, using the regression equation including the assumptions that were used to create the demand. Justify the assumptions made related to the forecast. We calculated demand for the first year and second year as follows. Based on our forecasted demand for the first four months which did not generate little to no sales we think it would be a bad idea for Domino’s Pizza to establish its presence in our community.