You are told by someone that they believe the soft drink demand schedule in the MMH textbook is incorrectly specified. A key variable that is missing is whether or not the state is on a coast line. Everyone knows that States on the coast will have higher soft drink demand because beach goers absolutely love to take soft drinks to the beach. You will assess this statement. The states designated by me (highlighted) as OCEAN states are on the table below.
Estimate a linear specification of the MMH Soft Drink Demand example but also with an OCEAN dummy variable included. The dummy variable is OCEAN = 1 for an ocean state (listed above) and OCEAN = 0 for a non-ocean state. The Soft Drink Demand function to estimate is:
Cans = + 1*Price + 2*Income + 3*Temp + 4*OCEAN.
1a. Is coefficient for 4 (OCEAN) statistically significant at better than the .10 level? Write your answer in 1a above.
1b. Provide an interpretation for the OCEAN coefficient. What does it tell you? Ignore whether it is statistically significant or not.
1c. Suppose price = 2.08, Income = 17, Temp = 69 and the state is an OCEAN state. Use your estimated demand function to find the point Price Elasticity of demand and write it in 1c above. [Side Note: you are finding the price elasticity of demand for Texas.]
1d. Suppose price = 2.08, Income = 17, Temp = 69 and the state is an OCEAN state. Use your estimated demand function to find the point Income Elasticity of demand and write it in 1d above. [Side Note: you are finding the income elasticity of demand for Texas.]
State Cans Price Income Temp LNQ LNP LNINC LNTEMP Alabama 200 2.19 13 66 5.298317367 0.783901544 2.564949357 4.189654742 Arizona 150 1.99 17 62 5.010635294 0.688134639 2.833213344 4.127134385 Arkansas 237 1.93 11 63 5.468060141 0.657520003 2.397895273 4.143134726 California 135 2.59 25 56 4.905274778 0.951657876 3.218875825 4.025351691 Colorado 121 2.29 19 52 4.795790546 0.828551818 2.944438979 3.951243719 Connecticut 118 2.49 27 50 4.770684624 0.91228271 3.295836866 3.912023005 Delaware 217 1.99 28 52 5.379897354 0.688134639 3.33220451 3.951243719 Florida 242 2.29 18 72 5.488937726 0.828551818 2.890371758 4.276666119 Georgia 295 1.89 14 64 5.686975356 0.636576829 2.63905733 4.158883083 Idaho 85 2.39 16 46 4.442651256 0.871293366 2.772588722 3.828641396 Illinois 114 2.35 24 52 4.736198448 0.854415328 3.17805383 3.951243719 Indiana 184 2.19 20 52 5.214935758 0.783901544 2.995732274 3.951243719 lowa 104 2.21 16 50 4.644390899 0.792992516 2.772588722 3.912023005 Kansas 143 2.17 17 56 4.96284463 0.774727168 2.833213344 4.025351691 Kentucky 230 2.05 13 56 5.438079309 0.717839793 2.564949357 4.025351691 Louisiana 269 1.97 15 69 5.59471138 0.678033543 2.708050201 4.234106505 Maine 111 2.19 16 41 4.709530201 0.783901544 2.772588722 3.713572067 Maryland 217 2.11 21 54 5.379897354 0.746687947 3.044522438 3.988984047 Massachusetts 114 2.29 22 47 4.736198448 0.828551818 3.091042453 3.850147602 Michigan 108 2.25 21 47 4.682131227 0.810930216 3.044522438 3.850147602 Minnesota 108 2.31 18 41 4.682131227 0.837247525 2.890371758 3.713572067 Mississippi 248 1.98 10 65 5.513428746 0.683096845 2.302585093 4.17438727 Missouri 203 1.94 19 57 5.313205979 0.662687973 2.944438979 4.043051268 Montana 77 2.31 19 44 4.343805422 0.837247525 2.944438979 3.784189634 Nebraska 97 2.28 16 49 4.574710979 0.824175443 2.772588722 3.891820298 Nevada 166 2.19 24 48 5.111987788 0.783901544 3.17805383 3.871201011 New Hampshire 177 2.27 18 35 5.176149733 0.819779831 2.890371758 3.555348061 New Jersey 143 2.31 24 54 4.96284463 0.837247525 3.17805383 3.988984047 New Mexico 157 2.17 15 56 5.056245805 0.774727168 2.708050201 4.025351691 New York 111 2.43 25 48 4.709530201 0.887891257 3.218875825 3.871201011 North Carolina 330 1.89 13 59 5.799092654 0.636576829 2.564949357 4.077537444 North Dakota 63 2.33 14 39 4.143134726 0.845868268 2.63905733 3.663561646 Ohio 165 2.21 22 51 5.105945474 0.792992516 3.091042453 3.931825633 Oklahoma 184 2.19 16 82 5.214935758 0.783901544 2.772588722 4.406719247 Oregon 68 2.25 19 51 4.219507705 0.810930216 2.944438979 3.931825633 Pennsylvania 121 2.31 20 50 4.795790546 0.837247525 2.995732274 3.912023005 Rhode Island 138 2.23 20 50 4.927253685 0.802001585 2.995732274 3.912023005 South Carolina 237 1.93 12 65 5.468060141 0.657520003 2.48490665 4.17438727 South Dakota 95 2.34 13 45 4.553876892 0.850150929 2.564949357 3.806662491 Tennessee 236 2.19 13 60 5.463831805 0.783901544 2.564949357 4.094344562 Texas 222 2.08 17 69 5.402677382 0.732367894 2.833213344 4.234106505 Utah 100 2.37 16 50 4.605170186 0.862889955 2.772588722 3.912023005 Vermont 64 2.36 16 44 4.158883083 0.858661619 2.772588722 3.784189634| Virginia 270 2.04 16 58 5.598421959 0.712949808 2.772588722 4.060443011 Washington 77 2.19 20 49 4.343805422 0.783901544 2.995732274 3.891820298 West Virginia 144 2.11 15 55 4.9698133 0.746687947 2.708050201 4.007333185 Wisconsin 97 2.38 19 46 4.574710979 0.867100488 2.944438979 3.828641396 Wyoming 102 2.31 19 46 4.624972813 0.837247525 2.944438979 3.828641396 highlighted are ocean states State Cans Price Income Temp LNQ LNP LNINC LNTEMP Alabama 200 2.19 13 66 5.298317367 0.783901544 2.564949357 4.189654742 Arizona 150 1.99 17 62 5.010635294 0.688134639 2.833213344 4.127134385 Arkansas 237 1.93 11 63 5.468060141 0.657520003 2.397895273 4.143134726 California 135 2.59 25 56 4.905274778 0.951657876 3.218875825 4.025351691 Colorado 121 2.29 19 52 4.795790546 0.828551818 2.944438979 3.951243719 Connecticut 118 2.49 27 50 4.770684624 0.91228271 3.295836866 3.912023005 Delaware 217 1.99 28 52 5.379897354 0.688134639 3.33220451 3.951243719 Florida 242 2.29 18 72 5.488937726 0.828551818 2.890371758 4.276666119 Georgia 295 1.89 14 64 5.686975356 0.636576829 2.63905733 4.158883083 Idaho 85 2.39 16 46 4.442651256 0.871293366 2.772588722 3.828641396 Illinois 114 2.35 24 52 4.736198448 0.854415328 3.17805383 3.951243719 Indiana 184 2.19 20 52 5.214935758 0.783901544 2.995732274 3.951243719 lowa 104 2.21 16 50 4.644390899 0.792992516 2.772588722 3.912023005 Kansas 143 2.17 17 56 4.96284463 0.774727168 2.833213344 4.025351691 Kentucky 230 2.05 13 56 5.438079309 0.717839793 2.564949357 4.025351691 Louisiana 269 1.97 15 69 5.59471138 0.678033543 2.708050201 4.234106505 Maine 111 2.19 16 41 4.709530201 0.783901544 2.772588722 3.713572067 Maryland 217 2.11 21 54 5.379897354 0.746687947 3.044522438 3.988984047 Massachusetts 114 2.29 22 47 4.736198448 0.828551818 3.091042453 3.850147602 Michigan 108 2.25 21 47 4.682131227 0.810930216 3.044522438 3.850147602 Minnesota 108 2.31 18 41 4.682131227 0.837247525 2.890371758 3.713572067 Mississippi 248 1.98 10 65 5.513428746 0.683096845 2.302585093 4.17438727 Missouri 203 1.94 19 57 5.313205979 0.662687973 2.944438979 4.043051268 Montana 77 2.31 19 44 4.343805422 0.837247525 2.944438979 3.784189634 Nebraska 97 2.28 16 49 4.574710979 0.824175443 2.772588722 3.891820298 Nevada 166 2.19 24 48 5.111987788 0.783901544 3.17805383 3.871201011 New Hampshire 177 2.27 18 35 5.176149733 0.819779831 2.890371758 3.555348061 New Jersey 143 2.31 24 54 4.96284463 0.837247525 3.17805383 3.988984047 New Mexico 157 2.17 15 56 5.056245805 0.774727168 2.708050201 4.025351691 New York 111 2.43 25 48 4.709530201 0.887891257 3.218875825 3.871201011 North Carolina 330 1.89 13 59 5.799092654 0.636576829 2.564949357 4.077537444 North Dakota 63 2.33 14 39 4.143134726 0.845868268 2.63905733 3.663561646 Ohio 165 2.21 22 51 5.105945474 0.792992516 3.091042453 3.931825633 Oklahoma 184 2.19 16 82 5.214935758 0.783901544 2.772588722 4.406719247 Oregon 68 2.25 19 51 4.219507705 0.810930216 2.944438979 3.931825633 Pennsylvania 121 2.31 20 50 4.795790546 0.837247525 2.995732274 3.912023005 Rhode Island 138 2.23 20 50 4.927253685 0.802001585 2.995732274 3.912023005 South Carolina 237 1.93 12 65 5.468060141 0.657520003 2.48490665 4.17438727 South Dakota 95 2.34 13 45 4.553876892 0.850150929 2.564949357 3.806662491 Tennessee 236 2.19 13 60 5.463831805 0.783901544 2.564949357 4.094344562 Texas 222 2.08 17 69 5.402677382 0.732367894 2.833213344 4.234106505 Utah 100 2.37 16 50 4.605170186 0.862889955 2.772588722 3.912023005 Vermont 64 2.36 16 44 4.158883083 0.858661619 2.772588722 3.784189634| Virginia 270 2.04 16 58 5.598421959 0.712949808 2.772588722 4.060443011 Washington 77 2.19 20 49 4.343805422 0.783901544 2.995732274 3.891820298 West Virginia 144 2.11 15 55 4.9698133 0.746687947 2.708050201 4.007333185 Wisconsin 97 2.38 19 46 4.574710979 0.867100488 2.944438979 3.828641396 Wyoming 102 2.31 19 46 4.624972813 0.837247525 2.944438979 3.828641396 highlighted are ocean states
