Question

Suppose the Kalamazoo Brewing Company (KBC) currently sells its microbrews in a seven-state area: Illinois, Indiana, Michigan, Minnesota, Mississippi, Ohio, and Wisconsin. The company’s marketing department has collected data from its distributors in each state. This data consists of the quantity and price (per case) of microbrews sold in each state, as well as the average income (in thousands of dollars) of consumers living in various regions of each state. The data for each state are available via the link below--please note there are multiple tabs at the bottom of the spreadsheet, each refers to one of the seven states selling the Kalamazoo Brewing Company’s microbrews.

Excel Data File

Assuming that the underlying demand relation is a linear function of price and income, use your spreadsheet program to obtain least squares estimates of Ohio’s demand for KBC microbrews.

Instruction: If the estimate is negative, enter a negative number (-) in the equation. Enter your responses rounded to two decimal places.

Q =  +  Price +  Income

Quantity	Price	Income
575	31.26	33.95
674	30.69	35.51
616	31.54	28.78
183	27.41	30.44
501	29.75	31.28
578	29.48	33.77
590	28.94	38.31
445	28.17	34.01
603	28.58	32.53
713	28.57	31.69
337	30.06	32.26
230	29.36	31.57
403	28.81	32.75
383	32.52	29.48
568	32.02	35.91
698	32.91	34.85
826	28.45	34.06
789	26.85	38.92
645	30.49	35.94
601	31.72	38.05
467	31.23	36.48
429	31.28	37.61
552	28.89	38.29
553	31.13	36.9
562	27.52	39.22
352	30.02	34.21
611	31.38	33.97
346	29.08	38.53
354	28.8	34.4
401	27.64	34.01
253	30.47	34.24
524	30.97	38.29
211	32.85	34.66
666	30.11	41.38
468	29.48	32.14
585	28.41	29.16
578	29.96	35.05
656	30.46	37.11
571	32.86	32.94
454	28.49	32.7
510	30.67	33.14
672	31.92	33.73
499	28.44	41.92
560	27.94	35.06
848	29.74	32.71
617	29.54	37.96
530	31.34	37.38
649	30.08	35.55
824	29.13	42.89
626	31.72	37.17

Answer 1

Running Regression in excel for the following equation:

Q = B₁(Price) + B₂(INCOME) + _Ui

Q = 1.57(Price) + 14(Income) + U_i

This indicates that With one unit increase in Price Quantity demanded increases by 1.57 Units.

and,

With one unit increase in Income Quantity demanded increases by 14 Units.

Model has Adj R² of 93.1 implying 93% of variation of Q is explained by independent variables.

Significance F is also 0 implying that atleast one independent variable has statistically impacted Quantity demanded.

However, Price is not statistically significant as P-value is 0.82 which is >0.5 . So, the Null hypothesis of Price having a significant impact on Quantity demanded cannot be rejected.