Managerial Economics

Managerial Economics

Introduction

The purpose of this study is to expand the boundaries of our knowledge by exploring some relevant information relating to the macroeconomic analysis of Domino's Pizza. In this paper, we will conduct research about the demographics of our community. Once we have examined the demographics, It would become relatively easy for to us make decisions based on Demand and Forecasting.

Discussion

Selection of Independent variables

In order to forecast the demand of Dominos pizza in our community, we have taken the quantity demanded (sales of Pizzas per month) as dependent variable. The independent variables for our forecast include the price of pizzas and the household income. In microeconomics, there are several factors that influence demand (Allen, 1997):

The price of the goods purchased;

The price of complementary goods and substitutes;

The income of the consumer;

The subjective expectations of consumers;

The elasticity or inelasticity of the demand;

Consumer needs

The primary reason for taking price as an independent is that it has the strongest influence on the demand of Domino's Pizza. In recent years, it has been seen that whenever the management of Domino's Pizza has decided to raise the price of its pizza, the sales of pizza tends to decline. This factor not only affects the demand of Domino's Pizza but also results in the fluctuation its share price in the stock market. Therefore, we have opted to include the price factor in our equation as a primary independent variable. Apart from price, we have also taken house hold income as an independent variable and examined its affect on the demand of Domino's Pizza.

The purpose of taking household income as an independent variable is to find out the changes in the demand of Domino's pizza due to the change in income. Most often price determines the demand of a product or service, however if the price is kept constant, other variables i.e. household income, also pose an impact on the demand of the product. The variation in the price of the product or service cause the demand to move along the curve, however, variation in household income would cause the demand curve to shift upwards or downwards (John, 2012). Therefore, we have taken different nature of variables in order to scrutinize diverse behaviors of demand of Pizza (i.e. movement of demand along the curve and shift in demand).

Months (2012)

Quantity demanded (pizza per month)

Price (dollars per pizza)

Annual household income

1

6000

4.50

25500

2

5700

4.90

25600

3

5500

5.00

25700

4

6200

4.40

25970

5

5100

5.30

25970

6

4900

5.40

25750

8

5000

5.30

25750

9

4800

5.50

25950

$5

$25,774

Regression Analysis

We will use regression analysis tool to ...