HIND OIL INDUSTRIES
ASSIGNMENT QUESTIONS
1. What are the relevant factors to be considered for modelling a demand function for Maa
mustard oil? How is each factor related to elasticities of demand? How does the estimation
of demand function incorporate the impact of each factor using the multiple regression
technique?
2. Analyze the estimated demand function and calculate the elasticities of demand for Hind
Oil Industries’ product. Use two models- Linear and Non Linear
LINEAR FUNCTION:
𝑸𝒅 = 𝒂 + 𝒃𝑷𝒙 + 𝒄𝑷𝒚 + 𝒅𝑴
NON LINEAR FUNCTION:
𝑸𝒅 = 𝒂𝑷𝒙 𝒃 𝑷𝒚 𝒄 𝑴𝒅
𝐥𝐧 𝑸𝒅 = 𝐥𝐧 𝒂 + 𝒃 𝐥𝐧 𝑷𝒙 + 𝒄 𝐥𝐧 𝑷𝒚 + 𝐥𝐧 𝑴
What do these calculations suggest about the effects of changes in each of these variables?
3. What would be the impact of a price change by HOI on the total revenue of Maa mustard
oil, keeping other variables constant?
4. What is the optimum price at which total revenue can be maximized for Maa mustard oil
if the competitors’ prices do not increase in October 2015 (scenario 1)? If competitors
increase their prices by around 6 per cent, as suggested in the case (scenario 2), what would
be the optimum price? Does the company benefit if competitors increase their prices?
Perform all calculations under the assumption of no increase in promotional expenditure in
the next month and a 1-per-cent increase in the per capita income of consumers.
5. Plot a demand curve and a total revenue curve using the estimated values of quantity
demanded from question 4. Analyze the findings of question 4 by using the concept of the
total revenue test and the plotted graphs.