FAO maths nerds

Anyone any good at demand forecasting??

Edited by seanyshuffler - 17 Apr 2013 at 12:25pm

Using annual data for 1935 to 1995, an estimate was made of the
demand function for cigarettes in the United States. The resulting
regression equation was estimated:
Log Q = -1.55 - 0.71 log P + 3.08 log A - 0.09 log I + 0.14 log Pc - 5.10 C
(-0.26) (1.18) (-0.89) (0.92) (-1.19)
Q = annual cigarette consumption.
P = average price of cigarettes.
A = total cigarette advertising.
I = per capita income.
Pc = average price of cigars.
C = a variable that equals 1 if the year under consideration is after
the American Cancer Society issues a report in 1953 linking
cigarette smoking with cancer and 0 otherwise.
The standard errors are shown in parentheses.
The value of R2 is 0.91.
(1) Interpret the estimated demand function for cigarettes.
(2) Conduct tests to determine the validity of the model.
(3) What implications do these results have for firms in the
industry?

seanyshuffler wrote: Using annual data for 1935 to 1995, an estimate was made of the demand function for cigarettes in the United States. The resulting regression equation was estimated: Log Q = -1.55 - 0.71 log P + 3.08 log A - 0.09 log I + 0.14 log Pc - 5.10 C (-0.26) (1.18) (-0.89) (0.92) (-1.19) Q = annual cigarette consumption. P = average price of cigarettes. A = total cigarette advertising. I = per capita income. Pc = average price of cigars. C = a variable that equals 1 if the year under consideration is after the American Cancer Society issues a report in 1953 linking cigarette smoking with cancer and 0 otherwise. The standard errors are shown in parentheses. The value of R2 is 0.91. (1) Interpret the estimated demand function for cigarettes. (2) Conduct tests to determine the validity of the model. (3) What implications do these results have for firms in the industry?

A proposal to increase excise taxes on alcohol by €1 to save lives will raise the price of a unit of alcohol from €4 to €5 (assumption that all the tax increase is passed on to the consumers).  The increase in price will reduce the quantity consumed from 200m units to 180m units.  Graph the demand curve.  Calculate and explain the change in consumer surplus.

    

 

Would the change in consumer surplus be 190?

 

Area of rectangle = €1x 180m=180

Area of triangle = €1 x 20m (1/2) =10

 

Change in consumer surplus = area of rectangle + area of triangle

 

Am I doing it right?

seanyshuffler wrote: A proposal to increase excise taxes on alcohol by €1 to save lives will raise the price of a unit of alcohol from €4 to €5 (assumption that all the tax increase is passed on to the consumers).  The increase in price will reduce the quantity consumed from 200m units to 180m units.  Graph the demand curve.  Calculate and explain the change in consumer surplus.        Would the change in consumer surplus be 190?   Area of rectangle = €1x 180m=180 Area of triangle = €1 x 20m (1/2) =10   Change in consumer surplus = area of rectangle + area of triangle   Am I doing it right?

how do they know how much it will reduce the demand by. What metric are they using to calculate the amount consumed on a hypothetical situation

seanyshuffler wrote: Bump Have an exam in 90mins and would like to know if I'm doing this correct? Anyone?

 

seanyshuffler wrote: Bump Have an exam in 90mins and would like to know if I'm doing this correct? Anyone?

Baldrick wrote: seanyshuffler wrote: Bump Have an exam in 90mins and would like to know if I'm doing this correct? Anyone? jesus christ, if you are coming to ybig for an answer to something on your course you are fcked.  how do you know someone on here could not totally take the piss out of you and give you a bullsh*t answer.

If your unable to solve the answer there is no need to take it out on me.  Maybe you should vent your frustration in some other way.