Question
I NEED HELP WITH DISCUSSION PORTION> MY PROFESSOR COMMENTS IN BOLD. WHAT I WROTE IN ITALIC. I DID THE REGRESSION TABLES BUT DO NOT KNOW
I NEED HELP WITH DISCUSSION PORTION> MY PROFESSOR COMMENTS IN BOLD. WHAT I WROTE IN ITALIC. I DID THE REGRESSION TABLES BUT DO NOT KNOW HOW TO ATTACH.
Input the following data into Excel.
9)Assume that Q = quantity of pizza, X1 = price of pizza (in cents), X2 = tuition (in thousands of dollars),
X3 = price of soft drinks (in cents):
QX1X2X3
PizzaPrice of PizzaTuitionPrice of Soda
1211013100
1011010125
1012514130
121101580
111501690
121001295
1015012100
81601090
91501395
1013515100
111251695
1210017100
137510100
1010012110
91106125
81251090
8150580
4100095
a)Estimate the linear demand function with Q as the dependent variable and X1 as the independent variable.Is this a good model?How do you know (explain relevant results)?The form of the model is . THIS ANSWER WAS FINE.
As per the above results, a unit change in price changes quantity demand by -0.07 units. The coefficient is statistically significant at all conventional significance levels since the p-value is very low, i.e., close to 0. The identification problem occurs because both quantity demanded and quantity supplies are functions of price. It is hard to hypothesize a priority in which relation we are considering demand or supply. And with a regression, we may get either a demand function or a supply function.
b)Estimate the linear demand function with Q as the dependent variable and Price, Tuition, Price of Soft Drinks, as the independent variables. Comment fully on the results. HELP NEEDED
As can be seen (what if I am your boss and don't understand t-statistics or p-values?), the coefficients of own price and related price (factor affecting demand) are statistically significant, whereas the coefficient of tuition (factor affecting supply). Hence, the equation can be identified as the demand equation, where soft drinks seem to complement the product under consideration.
c)Take the natural logs of Q, X1, X2, and X3 and estimate this version of the D function.Comment fully on the results What is the value of the price elasticity of demand? What is the value of the cross-price elasticity of demand?HELP NEEDED.
When we consider the equation in logarithmic terms (both dependent and independent variables), the coefficients can be interpreted as elasticities since they measure the % change in quantity demanded with respect to % change in price or related price absolute change. In the present case, the own-price elasticity = -0.81 (since the absolute elasticity is less than 1, the product is inelastic).How to interpret this?As the price of soda rises by 1%, the quantity demanded of pizza (rises/falls) by how much? And the cross-price elasticity = -1.13. Since the sign of cross-price elasticity is negative, soft drinks complement the product under analysis.[The bits on the elasticity and what they mean is good].
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