Question

The ice cream store cool stuff sells exotic ice creams, including Tropical Cream and Green Mango. Cool Stuff has been varying the prices of these two flavors over the past 16 quarters and has recorded the sales data. The table shows the quantity sold of Tropical Cream, Q, given the price of a half-gallon of Tropical Cream, P, and the price of the other flavor, Green Mango, Po. Use these data to estimate the demand function for Tropical Cream. Now assume that these data represent quarterly time series for four years (4*4=16). For this question, first of all, write down the estimated equation. If the prices remain unchanged and the city continues to grow, use the Excel's regression tool to forecast the Ice Cream Store for the fifth year. Use quarterly dummy variables in your analysis.

Q	P	P0
210	21	13
205	23	15
213	22	15
208	23	16
205	24	16
210	23	16
218	21	13
201	25	18
205	25	18
198	26	18
205	24	17
195	26	18
222	21	19
156	25	15
189	24	14
198	20	18

Answer 1

The estimated equation

Q predicted = 250.68-3.9P+2.37Po+9.44Q1-1.77Q2+9.34Q3+0Q4

Substituting the coefficient values in equation and borrowing year 4 prices to 5th year we get prediction which is marked in yellow color,