Managerial Economics Assignment (weight 20%)

Use the spreadsheet data to estimate the demand for soft drinks. the spreadsheet data includes the demand for soft drinks in each of the 48 continental states for a particular year. Present your results in the form of a short report (maximum 1500 words) with the following elements:

1. A brief introduction to report. This should include an indication of the form of the model used, including the expected signs of the coefficients for each variable (use quality academic resources in this area, why do you think these factors affect the demand function).
2. An analysis of each variable in the model. This should include:
   • An interpretation of each estimated coefficient
   • A discussion of whether sign of the estimated coefficient met your expectation
   • Testing the validity of each variable using the p-value
3. Calculate the point price elasticity, the point income elasticity, and the point cross-price elasticity for soft drinks. Given an interpretation of each calculated elasticity. Based on the estimated elasticities, answer the following questions:
   • Should soft drink companies increase or decrease the price to increase revenue from soft drinks?
   • Are soft drinks a normal or inferior good in this situation?
   • What is the relationship between soft drinks and bottled water?

V. Give a brief conclusion. Summarize why you think the model is good or not. Indicate which variables are significant and which are not. In a second paragraph, discuss which potential problems might be relevant in this case. This includes the problems they lead to and potential solutions.

Cans Bought Cans bought in each state, in millions 6-Pack Price Price of a six-pack of soft drinks, in cents to make interpretation easier Per Capita Income Per capita nominal income, in thousands of dollars Price of Water Price of a bottle of water, in cents Population Population of each state, in millions Cost of Living Cost of living index for each state, can be used as a proxy for the Consumer Price Index (Source: World Population Review)Column1 Cans Bought 6-Pack Price Per Capita Income Price of Water Population Cost of Living State (Millions (Cents) ($ Thousands (Cents Per Bottle) (Millions Index 981 196 $49.90 30 4.9 89.3 Alabama Arizona 1126 193 $59.20 30 7.5 97 Arkansas 712 168 $47.10 28 3 86.9 California 5347 393 $75.30 43 39.6 151.7 Colorado 715 242 $72.00 28 5.9 105.6 426 318 $76.30 32 3.6 127.7 Connecticutt Delaware 305 215 $64.80 28 1.4 108.1 5301 224 35 97.9 Florida $55.50 21.9 3187 169 $58.80 29 10.8 89.2 Georgia 163 221 $55.60 21 1.9 92.3 Idaho 1437 222 $65.00 25 12.6 94.5 Illinois 197 $55.70 24 6.8 90 Indiana 1252 lowa 334 199 $ 60.00 23 3.2 90 1 416 193 25 2.9 Kansas $58.20 89 1036 186 $50.20 26 4.5 90.9 Kentucky 1238 185 $47.90 33 4.6 93.9 Louisiana Maine 156 257 $55.60 24 1.4 1 17.5 Maryland 1325 273 $83.20 35 6.1 129.7 6.9 131.6 Massachusetts 788 301 $79.80 31 Michigan 1081 200 $56.70 21 10 88.9 Minnesota 617 235 $70.30 21 5.7 101.6 Mississippi 745 170 $44.70 28 3 86.1 Missouri 1260 169 $54.50 25 6.2 87.1 247 $55.30 106.9 Montana 86 24 1.1 Nebraska 195 207 $59.60 22 2 90.8 532 238 $58.60 26 3.2 108.5 Nevada New Hampshire 249 249 $75.00 19 1.4 109.7 1274 289 $81.70 34 8.9 125.1 New Jersey New Mexico 331 190 $47.20 25 2.1 87.5 New York 2143 338 $67.80 34 19.3 139.1 3532 179 $53.90 28 10.7 94.9 North Carolina 98.8 North Dakota 51 230 $63.80 20 0.8 Ohio 1932 201 $56.10 23 11.7 90.8 Oklahoma 737 191 $51.90 36 4 87 134.2 Oregon 292 302 $63.40 34 4.3 Pennsylvania 293 235 $ 60.90 26 12.8 101.7 Rhode Island 153 266 $64.30 30 1.1 119.4 South Carolina 1257 185 $52.30 31 5.3 95.9 South Dakota 87 234 $56.30 23 0.9 99.8 Tennessee 1629 194 $52.40 27 6.9 88.7 6594 190 $60.60 32 29.7 91.5 Texas 331 233 $71.40 25 3.3 98.4 Utah 39 270 $60.80 25 0.6 114.5 Vermont 2323 8.6 100.7 Virginia 205 $72.60 29 Washington 602 242 $74.10 27 7.8 110.7 West Virginia 260 192 $44.10 25 1.8 91.1 573 232 $60.80 23 5.9 97.3 Wisconsin Wyoming 62 206 $61.60 21 0.6 89.3