340topic4-estimation.ppt - Econ340 Topic 4 Demand Estimation Chapter 5 Demand Estimation Keat Young Managerial Econ 1 Estimation of demand \u2022 To

340topic4-estimation.ppt - Econ340 Topic 4 Demand...

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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 1 Econ340: Topic # 4: Demand Estimation Chapter 5 Demand Estimation
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 2 Estimation of demand To estimate demand, a commonly used procedure by economists is regression analysis. regression analysis is either: Simple regression: use single independent variable. Multiple regression: use more than one independent variable .
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 3 Regression Analysis Regression equation: linear, additive Y = a + b 1 X 1 + b 2 X 2 + b 3 X 3 + b 4 X 4 …. + b n X n Y: dependent variable, amount to be determined a: constant value, y-intercept X n : independent (or explanatory) variables, used to explain the variation in the dependent variable b i : regression coefficients, or parameters to be estimated (it measures the impact of independent variable)
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 4 Regression Analysis To estimate a regression equation, certain stages are usually followed: 1. Identification of variables, specification of the model, and collection of data. 2. Estimation of regression coefficients (b i s) 3. Interpretation and evaluation of results. 4. Forecasting with regression results.
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 5 RA: Identification, Specification and data a. Identification of variables b. Data collection c. Specification of the model a. Identification of relevant variables What are the variables to be included in RA? Theoretically, include all price and non-price factors Role of : Economic theory Available data Other constraints
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 6 RA: Identification, Specification and data b. Data collection : two types of data: Cross-Sectional Data : provide information on variables for a given point of time. Time Series Data : give information about variables over a number of periods of time.
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 7 RA: Identification, Specification and data Data for studies pertaining to countries, regions, or industries are readily available and reliable. Data for analysis of specific product categories may be more difficult to obtain. Buy from data providers. Perform a consumer survey. Focus groups. Etc.
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Keat & Young: Managerial Econ . Adapted by Dr. M. A. Abdall 8 RA: Identification, Specification and data c. Specification of the model: Relation between quantity demanded and the independent variables is expressed in an equation.
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