Demand can be estimated with experimental data timeseries da

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

Solution

(1) Cans =514.2669 -242.9708*6-Pack Price ($)+1.3602*Income/Capita+2.9312*Mean Temp

------------------------------------------------------------------------------------------------------------------

(2) When 6-Pack Price variable increases one unit and fixed other varibles, the regression line decreases 242.9708.

When Income/Capita variable increases one unit and fixed other varibles, the regression line increases 1.3602

When Mean Temp variable increases one unit and fixed other varibles, the regression line increases 2.9312

------------------------------------------------------------------------------------------------------------------

(3) Yes, the regression estimated function is a good fit

R^2 =0.698

69.80% of variance can be explained by the regression line.

Yes, we may use the estimated function to predict for the future demand because the R^2 is not low.

------------------------------------------------------------------------------------------------------------------

(4)514.2669 -242.9708*1.95+1.3602*23.5+2.931*68 =271.7465

------------------------------------------------------------------------------------------------------------------

(5)

No, because it is not necessary.