Answer to Question #187059 in Economics for SAAD

Question

Products’ Demand Estimation – Case Study

As a case study, select data about price, prices of substitutes, advertisement and trends and quantity demanded of any product such as Soft Drink (Pepsi), Fast food (Pizza Line), Cellular Services (Mobilink) etc. for  “Demand Estimation" delving into the factors affecting the Products’ consumption and the ways to enhance its sales. It likewise looks into the factors positively or negatively affecting demand and sales.

 Case Study questions 

1.     Estimate the demand for soft drinks using a multiple regression program on your computer.

2.     Interpret the coefficients and calculate the price elasticity of soft drink demand.

Answer 1

The inclusion of a particular set of factors in the multiple regression equation is associated, first of all, with the researcher's idea of ​​the nature of the relationship between the modeled indicator and other economic phenomena. The factors included in multiple regression must and meet the following requirements:

   a) They must be quantifiable. If it is necessary to include in the model a qualitative factor that does not have quantitative measurement, then it needs to be quantified.

   b) Factors should not be intercorrelated (when) and even more so be in an exact functional connection. If there is a high correlation between the factors, then it is impossible to determine their isolated effect on the effective indicator and the parameters of the regression equation are not interpretable.