Estimation and Analysis of Demand for Fast Food Meals
You work for PriceWatermanCoopers as a market analyst. PWC has been hired by the owner of two
Burger King restaurants located in a suburban Atlanta market area to study the demand for its basic hamburger meal package–referred to as “Combination 1" on its menus. The two restaurants face competition in the Atlanta suburb from five other hamburger restaurants (three MacDonald’s and two
Wendy’s restaurants) and three other restaurants serving “drive-through” fast food (a Taco Bell, a
Kentucky Fried Chicken, and a small family-owned Chinese restaurant).
The owner of the two Burger King restaurants provides PWC with the data shown in Table 1. Q is the total number of Combination 1 meals sold at both locations during each week in 1998. P is the average price charged for a Combination 1 meal at the two locations. [Prices are identical at the two Burger King locations.] Every week the Burger King owner advertises special price offers at its two restaurants exclusively in daily newspaper advertisements. A is the dollar amount spent on newspaper ads for each week in 1998. The owner could not provide PWC with data on prices charged by other competing restaurants during 1998. For the one-year time period of the study, household income and population in the suburb did not change enough to warrant inclusion in the demand analysis.
TABLE 1: Weekly Sales Data for Combination 1 Meals (1998) week Q P A
1 51,472 3.22 4,314
2 50,464 2.79 3,909
3 86,859 3.66 12,394
4 118,244 2.29 19,284
5 48,151 3.09 6,484
6 97,502 3.39 8,784
7 75,878 3.3 9,634
8 78,924 3.79 9,634
9 59,983 3.89 9,634
10 23,823 3.69 6,284
11 61,512 3.65 4,814
12 63,877 3.46 6,804
13 61,123 3.6 6,359
14 84,403 3.39 9,689
15 54,349 3.09 10,484
16 58,258 3.68 9,784
17 55,525 3.99 11,534
18 70,070 4.19 9,009
19 79,912 4.29 9,009
20 39,019 4.2 6,789
21 43,367 4.09 5,534
22 52,205 4.02 4,399
23 11,448 4.22 9,559
24 73,240 4.19 18,634
25 80,115 3.66 14,484
26 98,438 3.86 15,534
27 79,080 2.71 21,259
28 53,002 4.22 7,614
29 81,390 4.39 4,209
30 67,387 3.96 4,399
31 83,450 3.89 12,284
32 68,449 4.36 11,884
33 72,052 4.49 14,394
34 29,499 4.45 9,574
35 21,837 4.12 7,284
36 37,960 4.06 4,314
37 41,281 4.01 13,834
38 51,052 4.09 15,334
39 57,784 4.33 5,284
40 52,163 4.3 7,684
41 58,804 4.39 6,684
42 74,029 4.35 9,884
43 55,454