Question

In: Economics

Year Q (millions of lbs) P Beef Per Lb ($) P Pork Per lb ($) Disp...

Year Q (millions of lbs) P Beef Per Lb ($) P Pork Per lb ($) Disp Inc (millions $) Pop (millions)
1975 19295 1.9 1.864 517250 182.76
1976 17535 2.312 1.944 566500 185.88
1977 19520 2.208 1.972 708250 189.12
1978 25622.5 1.68 2.072 631500 192.12
1979 26530 1.68 2.128 643500 195.6
1980 27745 1.64 1.776 688250 199.08
1981 29805 1.568 1.732 733000 202.68
1982 28950 1.648 1.916 771250 206.28
1983 26932.5 1.868 2.092 796250 209.88
1984 27592.5 1.892 1.792 843250 213.36
1985 30162.5 1.804 1.884 875000 216.84
1986 31530 1.708 1.916 911000 220.44
1987 31397.5 1.856 1.9 963250 223.8
1988 34122.5 1.668 1.772 1011500 227.04
1989 39107.5 1.592 1.772 1095250 230.28
1990 39987.5 1.732 2.128 1183000 233.16
1991 41775 1.768 2.276 1279750 235.92
1992 43130 1.804 2.06 1365750 238.44
1993 45675 1.892 2.036 1477500 240.84
1994 47185 1.968 2.3 1586000 243.24
1995 48722.5 1.96 2.276 1729250 245.88
1996 49242.5 2.188 1.992 1866000 248.4
1997 51277.5 2.304 2.58 2006250 250.56

Assignment 4.2 Beef Demand Model
A meat packing company hires you to study the demand for beef. The attached data are
supplied. Complete the following tasks, then open the quiz “4.2 Beef Demand” and
complete it.
1. Estimate the demand for beef as a function of the price of beef, the price of pork,
disposable income, and population. Label this as Model 1. Which independent
variables have a significant impact on the demand for beef?
2. The coefficient for the price of beef indicates that a one-dollar increase in price
leads to how large a decrease in quantity demanded?
3. Estimate the demand for beef as a function of the price of beef, the price of pork,
and per capita disposable income (per capita disposable income=[disposable
income/population]; you have to create this variable from the data). Label this as
Model 2. Which independent variables have a significant impact on the demand
for beef?
4. Which Model fits the data better? Comment on why, using statistics from the
regression model.
5. The meat packing company gives you the following assumptions: Price of
beef=$2; price of pork=$2.50; disposable income=$1,000,000; and
population=225. Given this information, use model 1 to complete the following:
a. Estimate of beef demand and a 95% confidence interval around this
estimate.
b. Estimate total revenue
c. Estimate the following elasticities: Price elasticity, Cross elasticity (that
is, elasticity with respect to Pork price), income elasticity, and population
elasticity.
d. Should the meat packing company increase or decrease the price of beef?
Why or why not?

Solutions

Expert Solution

Multiple R 0.99654
R Square 0.993091
Adjusted R Square 0.991556
Standard Error 936.983
Observations 23
ANOVA
df SS MS F Significance F
Regression 4 2.27E+09 5.68E+08 646.8264 3.56E-19
Residual 18 15802869 877937.2
Total 22 2.29E+09
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 22387.22 8795.19 2.545394 0.020294 3909.212 40865.23 3909.212 40865.23
P Beef Per Lb ($) -12804.2 1369.294 -9.35094 2.48E-08 -15681 -9927.4 -15681 -9927.4
P Pork Per lb ($) 1608.836 1361.079 1.182029 0.252575 -1250.69 4468.358 -1250.69 4468.358
Disp Inc (millions $) 0.022907 0.002125 10.78046 2.78E-09 0.018443 0.027371 0.018443 0.027371
Pop (millions) 36.60052 37.47358 0.976702 0.341662 -42.1285 115.3296 -42.1285 115.3296

1) Model1

Q= 22387.22-12804.2*price of beef+1608.836 *price of pork+0.022907 Disp income+ 36.60052Pop

Price of pork has significant effect

2) The coefficient for the price of beef indicates that a one-dollar increase in price
leads to 12804.2 decrease in quantity demanded.

3)

SUMMARY OUTPUT
Regression Statistics
Multiple R 0.994732
R Square 0.989491
Adjusted R Square 0.987832
Standard Error 1124.769
Observations 23
ANOVA
df SS MS F Significance F
Regression 3 2.26E+09 7.54E+08 596.3294 5.76E-19
Residual 19 24036994 1265105
Total 22 2.29E+09
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 25433.41 2832.654 8.978653 2.9E-08 19504.6 31362.23 19504.6 31362.23
P Beef Per Lb ($) -15007.6 1245.063 -12.0537 2.4E-10 -17613.6 -12401.7 -17613.6 -12401.7
P Pork Per lb ($) 941.0356 1579.913 0.595625 0.558455 -2365.76 4247.832 -2365.76 4247.832
per capita income 7.363545 0.217049 33.92568 1.82E-18 6.909256 7.817834 6.909256

7.817834

Model 2-

Q= 25433.41-15007.6*price of beef+941.0356 *price of pork+ 7.363545Per capita income

4) Model 2 fits the data better as the number of variables are consolidated and brings out a better estimate as not single variable has significant effect on the quantity demanded for beef.

As the p values for model two close to each other except for price of pork so we can remove it

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Year Price of Fish Quantity of Fish Price of Pork Quantity of Pork Price of Beef...
Year Price of Fish Quantity of Fish Price of Pork Quantity of Pork Price of Beef Quantity of Beef 2006 $10 200 $11 225 $12 275 2007 11 325 9 200 13 375 2008 12 500 10 325 16 475 e. Calculate Real GDP for 2007 and 2008 using the chain-weighted method. f. Calculate the GDP deflator and inflation using Real GDP from part e.
Assume the market for beef is described by the following demand and supply functions: Q(p) =...
Assume the market for beef is described by the following demand and supply functions: Q(p) = -6 + 6P…………………………………(1) Q(p) = 50 – 2P^2…………………………………(2) (a)Which of the two equations is the demand curve? How did you know? (b)Find the equilibrium price ($) and equilibrium quantity transacted (000 lb.)in this market. (c)Determine the price elasticity of demand at equilibrium for this product. (d)Suppose the adoption of a new technology allows this beef producer to increase supply by 4, how will this...
Assume the market for beef is described by the following demand and supply functions: Q(p) =...
Assume the market for beef is described by the following demand and supply functions: Q(p) = -6 + 6p ………………………………… Q(p) = 50 – 2P^2 ………………………………… (a)Which of the two equations is the demand curve? How did you know? (b)Find the equilibrium price ($) and equilibrium quantity transacted (000 lb.)in this market. (c)Determine the price elasticity of demand at equilibrium for this product. (d)Suppose the adoption of a new technology allows this beef producer to increase supply by 4, how...
Assume the market for beef is described by the following demand and supply functions: Q(p) =...
Assume the market for beef is described by the following demand and supply functions: Q(p) = -6 + 6P…………………………………(1) 2 Q(p) = 50 – 2P…………………………………(2) (a)Which of the two equations is the demand curve? How did you know? (b)Find the equilibrium price ($) and equilibrium quantity transacted (000 lb.)in this market. (c)Determine the price elasticity of demand at equilibrium for this product. (d)Suppose the adoption of a new technology allows this beef producer to increase supply by 4, how will...
Suppose that demand for a cigarettes (in millions of cartons) is given by Q=20 - ½ *P. Supply of cigarettes is given by Q=P.
Suppose that demand for a cigarettes (in millions of cartons) is given by Q=20 - ½ *P. Supply of cigarettes is given by Q=P. There is a negative consumption externality from cigarettes, in the amount of $2 per box.a. Draw the market for cigarettes, labeling the private marginal cost (PMC), social marginal cost (SMC), private marginal benefit (PMB) and social marginal benefit (SMB).b. What quantity of the good is consumed under the private market equilibrium?c. What is the socially optimal...
the demand for beef is P = 150 - 3Q where price is price per pound...
the demand for beef is P = 150 - 3Q where price is price per pound in cents and Q is quantity demanded per year in hundreds of pounds The supply curve is P = 5Q If a price floor of 50 cents per pound is imposed what are the new consumer and producer surplus?
1. Beef Co. in one year is expected to trade at $23 per share. And is...
1. Beef Co. in one year is expected to trade at $23 per share. And is expected to pay a dividend of 15 cents at the end of the year. If investments with equivalent risk have an expected return of 9%, what is the most you should pay for a Beef Co. stock today? 2. Bent CO. at the end of the year will have EPS of $7 and if the firm has a cost of capital of 12%: B)...
A monopolist faces the demand curve P =11 Q, where P is measured in dollars per...
A monopolist faces the demand curve P =11 Q, where P is measured in dollars per unit and Q in thousands of units. The monopolist has a constant average cost of $6 per unit. Answer the following questions, showing all workings. a) Calculate the monopolists profit-maximizing price and quantity. Calculate the monopolists profit. b) Draw the average and marginal revenue curves and the average and marginal cost curves for the monopolist including the area of profits (label the diagram accurately...
Let p and q be the propositions p:You drive over 65 miles per hour. q: You...
Let p and q be the propositions p:You drive over 65 miles per hour. q: You get a speeding ticket. Write these propositions using p and q and logical connectives. a) You do not drive over 65 miles per hour. b) You drive over 65 miles per hour, but you do not geta 1 speeding ticket. c) You will get a speeding ticket if you drive over 65 miles per hour. d) If you do not drive over 65 miles...
Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton.
Suppose that the demand for a special kind of silica is given by Q = 55 – 0.5P, where Q is in tons of silica per day and P is the price per ton. This special kind of silica is produced by Thorpe Industries (a monopolist) that has a constant marginal and average total cost of $10 per ton. [up to 6 points]Derive the inverse demand and marginal revenue curves faced by Thorpe Industries.Equate marginal cost and marginal revenue to...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT