Assignment: Cup of Soup
I have collected real data on the sale of a microwavable cup of soup across 20 different cities for the same time period (a month). The variables in the dataset (also attached) are:
Quantity sold in the city for that month: Measured in thousands of units
Price: measured in dollars
Average Income in the city: Measured in thousands of dollars
Ads: Average number of ads run in stores for that city during that month.
Price of a substitute product: measured in dollars
Population of the city: measured in thousands of people
Using Excel or any other statistical software, please answer the following questions:
I. Describe the patterns in quantity sold and own and rival prices during this time period using basic descriptive statistics. Graphs are welcome as well.
II. Take the logs of the variables, and estimate the demand function.
1. Interpret the R-square.
2. Interpret the coefficients for logP and logPsub
3. Interpret the p-values associated with each independent variable
III. Are consumers price sensitive? Why or why not? (be as precise as you can - you have estimates!). Does this price sensitivity make sense given the good we are examining?
IV. How sensitive are our consumers to changes in the rival good's price? Explain in detail.
V. Suppose we decide to charge a per ounce price of $2, while at the same time our rival charges a price of $2.15. All else equal, what would you expect sales to be? How confident are you in your forecast? Explain.
VI. Suppose we are charging a price of $2 and our current marginal cost is $1.50 Are we maximizing profits at this price? If not, should we raise or lower price? Why?
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.
Attachment:- Demand-Data-by-Cities.rar