Question: You have been presented with the following data and asked to fit statistical demand functions: PERIOD QUANTITY PRICE INCOME ADVERTISING 1 120 8.00 10 3
You have been presented with the following data and asked to fit statistical demand functions:
| PERIOD | QUANTITY | PRICE | INCOME | ADVERTISING |
| 1 | 120 | 8.00 | 10 | 3 |
| 2 | 165 | 4.00 | 22 | 7 |
| 3 | 120 | 7.00 | 20 | 5 |
| 4 | 165 | 3.00 | 20 | 8 |
| 5 | 180 | 4.00 | 30 | 8 |
| 6 | 90 | 10.00 | 19 | 6 |
| 7 | 150 | 4.00 | 18 | 10.2 |
| 8 | 190 | 1.60 | 25 | 9.3 |
| 9 | 160 | 5.00 | 30 | 8 |
| 10 | 200 | 2.00 | 35 | 9.5 |
a. Linear Relationship
- Use any multiple regression packages to estimate a linear relationship between the dependent variable and the independent variables.
- Is the estimated demand function "good"? Why or why not?
- Discuss the economic implications of the various coefficients.
b. Non- Linear relationship
- Select and estimate any form of non-linear relationship.
- Is the estimated demand function "good"? Why or why not? Compare with the linear form above. Elaborate.
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