Question

Specify a model that estimates the quantity demanded for beef in Fredericton. What type of variables will you consider in your model? Be specific as it is possible.

Answer 1

From the demand theory we know that the demand for any good will depend on its price and the price of related goods and the income of consumers. Similarly here the model that we are using to estimate the demand for beef fredericton we need to consider the price of beef, and the price of mutton or pork or chicken for simplicity let's take the price of meat as a proxy for related products to beef and the income level of consumers.

Yi = quantity demand for beef in fredericton

X1i = price of beef

X2i = price of meat

X3i = income level of consumer.

The model that we can use to estimate the demand for beef in fredericton

Yi = o + 1X1i + 2X2i + 3X3i

Here o = captures the average effect of all other variables that affect the demand for beef in fredericton.

1 = captures the effect of change in price of beef to its quantity demanded in fredericton

2 = captures the effect of change in price of meat on the quantity demanded for beef in fredericton

3 = captures the effect of change in income on quantity demanded of beef in fredericton