You have been presented with the following data and asked to fit statistical demand functions:
REGION
SALES (Y)
(‘000 gallons)
ADVERTISING EXPENSES (A)
($’000)
SELLING PRICE (P)
($/gallon)
DISPOSABLE INCOME (M)
1
160
150
15.00
19.0
2
220
13.50
17.5
3
140
50
16.50
14.0
4
190
14.50
21.0
5
130
90
17.00
15.5
6
60
16.00
14.5
7
200
13.00
21.5
8
110
18.00
18.0
9
210
12.00
18.5
10
100
15.50
20.0
Use any multiple regression packages to estimate a linear relationship between the dependent variable and the independent variables.
a.Linear Relationship
i.Identify the dependent and independent variables.
ii.Estimate a linear relationship between the dependent variable and all the independent variables.
iii.What are the tests that you would use to determine the ‘goodness-of-fit’ of the estimated demand function? Conduct the tests and explain the results.
iv.Discuss the economic implications of the various coefficients.
b.Non-linear relationship.
i.Estimate a logarithmic form of the demand function.
ii.Is the estimated demand function ‘good’? Explain your answer.
iii.Compare with the linear form above. Elaborate.
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here