Question
Daniel collected the following data on sales of his special instant coffee (he has been selling coffee to honours students as it is just under
Daniel collected the following data on sales of his special instant coffee (he has been selling coffee to honours students as it is just under two weeks from when their dissertations are due). Assume that income and the prices of competitors and compliments are his determinants of demand: Year Coffee Price Index Biscuits Price Index Disposable Income Index 2002 95.8 97.4 89.3 2007 105.3 102.7 102.4 2012 122.4 112.5 117.3 Based year: 2005 Using data of sales, he estimates the demand for his coffee to be: Qc = 5.34 + 0.068Pc - 0.013 Pb - 0.0067Y Where Qc is the number of packets of coffee sold per week (in thousands), Pc and Pb are the indexed prices of other coffee brands and biscuits respectively and Y is an index of household income after tax. a. Does the estimated demand for Daniel's coffee make sense according to economic theory? b. What were Daniel's weekly sales in 2002, 2007 and 2012? c. The CBA (Coffee and Biscuits Association) estimates the following index values for 2018 and 2022, what implications might this have for Daniel's coffee production business?
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