You have been
presented with the following data and asked to fit statistical...

Question

You have been
presented with the following data and asked to fit statisti­cal demand
functions:

REGION

SALES
  (Y)
  (‘000
  gallons)

ADVERTISING
  EXPENSES (A)
  ($’000)

SELLING
  PRICE (P)
  ($/gallon)

DISPOSABLE
  INCOME (M)
  ($’000)

1

160

150

15.00

19.0

2

220

160

13.50

17.5

3

140

50

16.50

14.0

4

190

14.50

21.0

5

130

90

17.00

15.5

6

160

60

16.00

14.5

7

200

140

13.00

21.5

8

150

110

18.00

18.0

9

210

200

12.00

18.5

10

190

100

15.50

20.0

Use any multiple
regression packages to estimate a linear relationship between the dependent
variable and the independent variables.

a.
Linear Relationship

i.
Identify the dependent and independent
variables.

ii.
Estimate a linear relationship between the
dependent variable and all the independent variables.

iii.
What are the tests that you would use to
determine the ‘goodness-of-fit’ of the estimated demand function? Conduct the
tests and explain the results.

iv.
Discuss the economic implications of the
various coefficients.

b.
Non-linear relationship.

i.
Estimate a logarithmic form of the demand
function.

ii.
Is the estimated demand function ‘good’? Explain
your answer.

iii.
Compare with the linear form above.
Elaborate.

Shakeel · Accepted Answer

(a)
i.	The dependent variable is ‘Sales’ and independent variables are ‘Advertising expenses’, ‘Selling price’ and Disposable income.
ii.	To establish the linear relationship, the multiple regression is run. According to the result, the relationship is defined by the following equation:
	Y = 310.24 + 0.008*A – 12.20*P + 2.677*M
iii.

You have been presented with the following data and asked to fit statistical demand functions: REGION SALES (Y) (‘000 gallons) ADVERTISING EXPENSES (A) ($’000) SELLING PRICE (P) ($/gallon) DISPOSABLE...

Solution

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REGION	SALES (Y) (‘000 gallons)	ADVERTISING EXPENSES (A) ($’000)	SELLING PRICE (P) ($/gallon)	DISPOSABLE INCOME (M) ($’000)
1	160	150	15.00	19.0
2	220	160	13.50	17.5
3	140	50	16.50	14.0
4	190	190	14.50	21.0
5	130	90	17.00	15.5
6	160	60	16.00	14.5
7	200	140	13.00	21.5
8	150	110	18.00	18.0
9	210	200	12.00	18.5
10	190	100	15.50	20.0

You have been presented with the following data and asked to fit statisti­cal demand functions: REGION SALES (Y) (‘000 gallons) ADVERTISING EXPENSES (A) ($’000) SELLING PRICE (P) ($/gallon) DISPOSABLE...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment

You have been presented with the following data and asked to fit statistical demand functions: REGION SALES (Y) (‘000 gallons) ADVERTISING EXPENSES (A) ($’000) SELLING PRICE (P) ($/gallon) DISPOSABLE...