DEMAND ESTIMATION: Soft Drinks
Demand can be estimated with experimental data, time-series data, or cross-section data. In this case, cross-section data appear in the Excel le. 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.
2. Interpret each coecient of independent variable in the soft drink demand estimated function in question 1.
3. Given your answer in question 1, please comment on whether the regression estimated function is a good t or not. What is the interpretation of coecient of determination (R-square)? May we use the estimated function to predict for the future demand ? Explain why.
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= 68F?
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?