Managerial Economics Estimating Demand Assignment (worth two assignments). Due on Weds 12/2/15 at 1:30 pm in class, though the assignment may submitted at the final exam and still be considered on time. Assignments submitted on 12/2 at 1:30 pm will earn a 10% bonus. Assignments not submitted by the start of the final exam, will be graded a zero. Assignments are to be typed including the cover page; single sided, double spaced, on 8.5x11 paper, and submitted in an 8.5x11 manila file folder (otherwise -15 points). Handwritten or unprofessionally written assignments will be graded a zero.

Take any good or service sold in the United States in which you would like to estimate the demand for that good or service. You may NOT use any goods mentioned in the textbook or in class.

1. For your good, explain why you have selected it. What made it of interest to you and why? (5)
2. A. For your good, identify/select 10 variables that you believe influence your good’s demand. Of your 10 variables at one must be related to income, one must be a substitute, one must be a complement and one must be a dummy variable. Write out, in model form, the equation for estimating the demand for your good or service. (10)

b. For each variable explain why you have selected it. What makes is so important that you have selected it for your model? Justify its inclusion based upon economic theory. You should write at least one paragraph per variable. (30)

3. What is the expected sign on the coefficient of each of your variables? Justify your answer. (10)

4. For each variable, explain where you will get this data. If you say, the internet or the library, etc., this will result in zero points. How accessible and available do you think this data will be and why? (10)

5. Do you believe your model is over identified or under identified? Explain why. If you say “no”, that will be worth zero points. (5)

6. Which of your variables are most likely to be multi collinear? Explain why. If you say “none” that will be worth zero points. (10)

7. What, in your model, might cause auto or serial correlation? Explain why. If you say “nothing” that will be worth zero points. (10)

8. What, in your model, might cause the problem of heteroscedasticity? Explain why. If you say “nothing” that will be worth zero points. (10)

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