Suppose that you are the owner of one of such type

s

o

f shops that sells eggs and cookies. You

sometimes put a poster on your storefront advertising either your fresh farm eggs, or your delicious

chocolate chip cookies. You are particularly concerned with the sales of eggs. Over a one month

period, you collec

ted data on sales of your eggs and the different prices you set for your products.

The data is presented below, where

Sales

represent the total eggs sold on the given day;

Price

Eggs

is the price of the eggs on the day;

Ad

Type

is the type of poster

-

0 is the egg poster, 1 is

the cookie poster and

Price

Cookies

represents the price of cookies on the day.

Your task is to

use the

data

that you have collected to

understand how price sensitive is your

demand for eggs and how the price of cookies impacts the sales of eggs.

On

average,

does

the

advert

isement

for

eggs

generate

higher

sales

for

eggs?

Explain all the steps you

have

used to estimate

your

eggs demand f

unction

(present proof of all

your calculations

, correlation matrix

and estimation procedure)

and discuss the results of your

analysis.

Discussing results involve

(without any particular order though your discussion must be

well structured)

:

-

Interpret the estimated coefficients

;

-

Discuss the significance level of the estimated coefficients;

-

Discuss the goodness of fitness of the estimated model;

-

Discuss the model to be estimated and the expected signs

(and why) on the coefficients;

-

Discuss if the assumptions of the OLS model are valid (need to verify tho

se first before running

the model)

-

Present a proof t

hat the models were run by you;

You may present screen shots of the outputs

and excel sheets to make proof that you have done the work

yourself

. You mus

t also print out the

summary outputs from excel and have your name and student ID written in the excel file you print

to attach to your work

(You cannot have your name or student ID written by hand

in the excel print

outs

).

-

After examining everything, students MUST provide a discussion of the results fou

nd.

Note: Before running any regres

sion do not forget to determine the correlation matrix first and

comment on the correlation between explanatory variables.

For this exercise you may use Eviews, Stata or Excel.

Dataset

Sales

Price.Eggs

Ad.Type

Price.Cookies

18

4.77

0

4.74

20

4.67

0

4.81

23

4.75

0

4.36

23

4.74

0

4.29

23

4.63

0

4.17

23

4.56

0

4.66

24

4.59

0

4.73

25

4.75

0

4.11

26

4.75

1

4.21

26

4.49

0

4.25

26

4.41

1

4.62

26

4.32

0

4.53

27

4.68

0

4.44

28

4.66

1

4.19

28

4.42

1

4.37

29

4.71

0

4.29

29

4.66

1

4.57

30

4.46

1

4.21

30

4.36

1

4.77

31

4.47

0

4

31

4.43

0

4.31

33

4.4

1

4.34

34

4.61

1

4.05

35

4.09

1

4.73

38

3.73

0

4.07

39

3.89

1

4.75

41

4.35

1

4

44

3.84

1

4.15

44

3.81

1

4.34

46

3.79

1

4.15