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PS4_ProblemSet

# PS4_ProblemSet - function of coke price income age2044...

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AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #4 This assignment is due at the beginning of class on Tuesday October 7, 2008. 1 Answer all of the following short questions. (a) Explain why we need to deflate price/monetary variables in empirical price analysis. (b) Why does CPI tend to overstate the increase in the cost of living from one year to the next? (c) If a price index is in the following form, which year is the base period? Year Index 1995 95 1996 98 1997 100 1998 110 2. Download the Coke_data.xls file from the Blackboard. (a) Are the data time series or cross sectional? (b) Estimate the coke demand equation as we did in class. That is, coke demand is a
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Unformatted text preview: function of coke price, income, age2044, juice price, trend, coke advertising, and juice advertising. Do deflate income and price before you run the regression. Use any software you choose (including Excel), turn in one page of computer output that contains all the estimated coefficients. (c) Write the coke demand equation out in algebraic form, e.g., Q DCoke = (d) Find the price elasticity of coke demand (i.e., EDp for coke). Interpret its meaning. (e) Find the elasticity of coke demand with respect to AGE2044. Interpret its meaning. (f) Do we find evidence that shows juice advertising affects coke demand? Explain why using one sentence. 1...
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