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

  1. Use any multiple regression packages to estimate a linear relationship between the dependent variable and the independent variables.
  2. Is the estimated demand function "good"? Why or why not?
  3. Discuss the economic implications of the various coefficients.

b. Non- Linear relationship

  1. Select and estimate any form of non-linear relationship.
  2. Is the estimated demand function "good"? Why or why not? Compare with the linear form above. Elaborate.

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