Instructions: Please use the data attached to estimate the demand function for P

ID: 1109643 • Letter: I

Question

Instructions: Please use the data attached to estimate the demand function for Pizza using the Ordinary Least Squares Method.

1. Write out an equation for the estimated demand function

2. Interpret the signs and values of all the estimated coefficients

3. Using the t-tests determine which coefficients are non-zero.

4. Compute the price elasticity, cross price elasticity and income elasticity of Pizza.

5. How confident are you that the sample used in this exercise is a good fit for the entire population

College Quantity Price of Pizza Tuition Price of Soda Location 1 10 100 14 100 1 2 12 100 16 95 1 3 13 90 8 110 1 4 14 95 7 90 1 5 9 110 11 100 0 6 8 125 5 100 0 7 4 125 12 125 1 8 3 150 10 150 0 9 15 80 18 100 1 10 12 80 12 90 1 11 13 90 6 80 1 12 14 100 5 75 1 13 12 100 12 100 1 14 10 110 10 125 0 15 10 125 14 130 0 16 12 110 15 80 1 17 11 150 16 90 0 18 12 100 12 95 1 19 10 150 12 100 0 20 8 150 10 90 0 21 9 150 13 95 0 22 10 125 15 100 1 23 11 125 16 95 1 24 12 100 17 100 0 25 13 75 10 100 1 26 10 100 12 110 1 27 9 110 6 125 0 28 8 125 10 90 0 29 8 150 8 80 0 30 5 150 10 95 0

Explanation / Answer

Answer:

We do this Analaysis using Excel .

DATA >>>>Data Analysis >>>>>Regression

1.Write out an equation for the estimated demand function

Y=26.66685004 -0.087750505*X1+0.138204092*X2 - 0.075895058 *X3 -0.54427895*X4

2.Interpret the signs and values of all the estimated coefficients

B0 =26.6668004.

If all independent variables are 0 then the dependent varuiable is 26.666804

B1=-0.087750505

If X1 decreases one unit then Y decreases0.087750505 unit

B2=0.138204092

If X 2increases one unit then Y increases 0.138204092 unit

B3=- 0.075895058

If X3 decreases one unit then Y decreases 0.075895058 unit

B4=-0.54427895

If X4 decreases one unit then Y decreases 0.54427895 unit

3.Using the t-tests determine which coefficients are non-zero.

t Stat

P-value

Intercept

8.13488757

1.73E-08

-4.858291804

5.37929E-05

1.595041559

0.123268453

-3.947598513

0.00056675

-0.615268178

0.543938324

Comment - See above P-values the only X1 and X3 are significant because P-values is less than 0.05 and X2 and X4 are not significant beacuse P-values is grater than 0.05.

.5) How confident are you that the sample used in this exercise is a good fit for the entire population?

>>> 71.65% we confident that sample used in this exercise is a good fit for the entire population.