2. Below is the estimated demand function for high-class tea (cups per month). Variable Estimated Coefficient Standard Error Constant 0.22 0.034 Price of high-class tea (in $100) -1.43 0.521 Income level (in $1000) 0.86 0.186 Being male 3.29 2.179 Sample Size 3624 3624 (a) For individual with income of $40000, he or she is found to consume 22 cups per month. Based on the estimation result above, compute and comment on the income elasticity for high-class tea. (b) According to the result, would males drink more high-class tea? Explain. (c) If you add the price of coffee into the demand analysis, what would you expect on the sign and significance of the price of coffee variable for the case of a rise in the price of coffee? Explain. While you are not required to provide computation or example, please use a demand-supply diagram for the market for tea to illustrate your expectation.
2. Below is the estimated
|
Variable |
Estimated Coefficient |
Standard Error |
|
Constant |
0.22 |
0.034 |
|
|
-1.43 |
0.521 |
|
Income level (in $1000) |
0.86 |
0.186 |
|
Being male |
3.29 |
2.179 |
|
|
3624 |
3624 |
(a) For individual with income of $40000, he or she is found to consume 22 cups per
month. Based on the estimation result above, compute and comment on the income
elasticity for high-class tea.
(b) According to the result, would males drink more high-class tea? Explain.
(c) If you add the price of coffee into the demand analysis, what would you expect on
the sign and significance of the price of coffee variable for the case of a rise in the
price of coffee? Explain. While you are not required to provide computation or
example, please use a demand-supply diagram for the market for tea to illustrate your expectation.
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