Question

home / study / business / economics / economics questions and answers / 1. in the following dataset you are given 48 observations on quantity demanded of soda, price ...

Question: 1. In the following dataset you are given 48 observations on Quantity Demanded of Soda, Price of ...

1. In the following dataset you are given 48 observations on Quantity Demanded of Soda, Price of a six pack (in $) and temperature (degrees). Each row of data corresponds to a different market.

a. Perform a regression of Quantity Demanded on Price and Temperature. Recall, the instructions to do regression using Excel are in a word doc under the chapter 4 module.

Attach the regression output to your take home. Write down the equation for the sample regression equation using the coefficients from your regression output. Interpret the numerical coefficients of each of the X variables (discuss not just the sign but also the size of the coefficient).

b. Perform t tests of statistical significance for each of the X variables and interpret those t-tests in terms of the actual variables in the model) – do not just state statistically significant, or insignificant.

c. Assuming the average price and average temperature (they are listed in the last row of the dataset) calculate the own price elasticity of demand, Ep and the temperature elasticity of demand, Etemp.

d. Suppose this firm was to set the same price for its six packs of soda in each of its markets. What would be the revenue maximizing price? How many units of the good would the firm sell at the revenue maximizing price? What would the own price elasticity of demand be at this price?

e. Suppose that the average temperature is expected to increase by 5% this year. What would be the forecasted percentage change in demand?

#cans	price	temp
200	2.19	66
150	1.99	62
237	1.93	63
135	2.59	56
121	2.29	52
118	2.49	50
217	1.99	52
242	2.29	72
295	1.89	64
85	2.39	46
114	2.35	52
184	2.19	52
104	2.21	50
143	2.17	56
230	2.05	56
269	1.97	69
111	2.19	41
217	2.11	54
114	2.29	47
108	2.25	47
108	2.31	41
248	1.98	65
203	1.94	57
77	2.31	44
97	2.28	49
166	2.19	48
177	2.27	35
143	2.31	54
157	2.17	56
111	2.43	48
330	1.89	59
63	2.33	39
165	2.21	51
184	2.19	82
68	2.25	51
121	2.31	50
138	2.23	50
237	1.93	65
95	2.34	45
236	2.19	60
222	2.08	69
100	2.37	50
64	2.36	44
270	2.04	58
77	2.19	49
144	2.11	55
97	2.38	46
102	2.31	46
	2.2025	53.60417

Answer 1

Quantity = f(Price and Temp)

Regression Output-

Regression Equation:

Quantity = 509.36 -229.47*Price + 2.87*Temp

Quantity and Temp are positively correlated and the change in quantity for a 5% change in Temp will be 14.35% change in Quantity

T value at 48-2-1=45 df and alpha =0.05 is 2.0141

Price is not very significant while the other two are