ECON 3305 Case 1

Demand can be estimated with experimental data, time-series data, or cross-section data. In this case, cross-section data appear in the Excel file. Soft drink consumption in cans per capita per year is related to six-pack price, income per capita, and mean temperature across the 48 contiguous states in the United States.

QUESTIONS

1. Given the data, please construct a multiple linear regression program by MS Excel. (20%)

2. Interpret each coefficient of independent variable in the soft drink demand estimated function in question 1. (20%)

3. Given your answer in question 1, please comment on whether the regression estimated function is a good fit or not. What is the interpretation of coefficient of determination (R-square)? May we use the estimated function to predict for the future demand? Explain why. (20%)

4. How many cans/capita/year on soft drink should be for a state in which 6-pack price=$1.95, Income/Capita=$23,500, and Mean Temp= 68°F? (20%)

5. Now omit the price and temperature from the regression equation. Should a marketing plan for soft drinks be designed that relocates most canned drink machines into low-income neighborhoods? Why or why not? (20%)