You have been presented with the following data and asked to fit statistical demand functions: PERIOD QUANTITY PRICE INCOME ADVErtising 1 120 8 10 3 2 165 4 22 7 3 120 7 20 5 4 165 3 20 8 5 180 4 30 8 6 90 10 19 6 7 150 4 18 10.2 8 190 1.6 25 9.3 9 160 5 30 8 10 200 2 35 9.5 Linear Relationship a. Use any multiple regression packages (eg. SPSS package) to estimate a linear relationship between the dependent variable and the independent variables. b. Is the estimated demand function “good”? Why or why not? c. Discuss the economic implications of the various coefficients. d. Compute the price elasticity of demand and income elasticity of demand in period 10. Elaborate your answers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You have been presented with the following data and asked to fit statistical demand functions:
PERIOD QUANTITY PRICE INCOME ADVErtising
1 120 8 10 3

2 165 4 22 7

3 120 7 20 5

4 165 3 20 8

5 180 4 30 8

6 90 10 19 6

7 150 4 18 10.2

8 190 1.6 25 9.3

9 160 5 30 8

10 200 2 35 9.5
Linear Relationship
a. Use any multiple regression packages (eg. SPSS package) to estimate a linear relationship
between the dependent variable and the independent variables.
b. Is the estimated demand function “good”? Why or why not?
c. Discuss the economic implications of the various coefficients.
d. Compute the price elasticity of demand and income elasticity of demand in period 10.
Elaborate your answers.

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