# What strategies can NFM pursue to increase sales and profits besides raising the price?Discuss some business strategies, using examples.

ECON 5308 TERM PAPER DUE: Thursday, February 25, 2021There are 4 questions. You are required to complete both questions 1 & 2. You are required to choose any one from Questions 3 or 4. However, if you attempt both, consider the fourth answer for extra-credit. Indicate in your paper which of the two you would like to be graded for “extra-credit.”Show all work to receive credit. You will need to upload the paper in Turnitin program –make sure you don’t“cut & paste” or copy from each other or published sources without acknowledging the source. Do not use long quotes from sources in your answers (a cumulative maximum match in Turnitin is set at 20%).1.Forecasting:Suppose you are given the following regression equation for Sony’s laptop computers (standard errors in parentheses.)Q = 8,400 -10 P + 5 A + 4 Px + 0.05 I (1,732) (2.29) (1.36) (1.75) ( 0.15)R2= 0.65N = 120F = 35.25Standard error of estimate = 34.3Q = Quantity demandedP = Price of Sony Laptop computers = \$1,000A = monthly advertising expenditures (in thousands) = 40Px= price of a related good = \$800I = average monthly income of buyers = \$4,000Answer the following questions based on the above equation and the data provided. (Show all work to receive full / partial credit). If you do not show work, your answers will not be graded. a)How many units can Sony expect to sell in a month? b)Using the information given above, calculate the own price elasticity? Given your calculations, should Sony increase or reduce the price to maximize revenuesc)Calculate the advertising elasticity and show the impact of advertising on salesd)Calculate the cross-price elasticity of demand for Sony laptops? Is the related good a substitute or complement? Why?e)Calculate the income elasticity of demand. What and how much impact will a recession have on sales of this product? Why? Explain.2.Nebraska Furniture MartNebraska Furniture Mart (NFM) is having a Labor Day sale fortheir goods in the Houston. They operate in a monopolistic competition market. NFM hires an economic consultant to estimate the price for their Book Shelvesand how many to order. The consultant estimates the demand function as follows:P = 925 –6 Q Where P = Price of Book Shelves and Q = number of Book Shelves soldper monthThe consultant further estimatesthe Total Cubic Cost function as TC = 25,000 + 25 Q –6 Q2 + 1/3Q3
Given these equations,

a)Determine the price and output of Book Shelves which NFM should sell which will maximize profits in the short-runb)How much NFM will earn in profits at this price and output rate?

c)Suppose there is a rise in the rent of NFM stores rise by 10%. Calculate the impact upon the firm’s price, output and profits. Provide an explanation to your answers.

d)What strategies can NFM pursue to increase sales and profits besides raising the price?Discuss some business strategies, using examples.

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