EMPIRICAL PROJECT
MICROECONOMICS
Sumbitted by:
Name :Vineel Kumar
Roll no: 20L134

Economics Assignment
Case study : Hind Oil Industries Demand Analysis
Q1. What are the relevant factors to be considered for modelling a demand
function for Maa mustard oil? How is each factor related to elasticities of
demand?
How does the estimation of demand
function incorporate the impact
of each factor using multiple regression technique
?
Ans: Factors that affect modelling of demand function of Maa mustard oil are
•
Per capita NSDP(Net state domestic product )
•
Price of product
•
Price of competitors product
•
Promotional Expenditure
Per capita NSDP will give income elasticity of demand
Income elasticity of demand shows the measure of response of how
quantity demanded varies with the change in income .If the income
elasticity of demand is positive then it is normal goods and in case of
negative it is an inferior goods
Price of product will give Price elasticity of demand
Price elasticity of demand is the measure how the changes in price of
product affect quantity demanded of the same product. If price elasticity of
demand is greater than 1 ,then its elastic i.e a small change in price will
have larger impact on quantity demanded and if price elasticity is less than
1 it will be inelastic i.e a large change in price will have small change in
quantity demanded and if price elasticity is 1 its unit elasticity i.e
a change
in price will cause an equal proportional change in quantity demanded.
Price elasticity of demand will always be negative

Price of competitors product will give Cross elasticity of demand
Cross price elasticity of demand is the measure how quantity demanded product
gets affected by the change in price of
other product . Cross price elasticity of
demand will be negative for complimentary goods(bread and butter) and positive
for substitute goods (coffee and tea)
Promotional Expenditure
With increase in expenditure in advertisement and promotion will give product
edge in market which will have impact on its quantity demanded
On performing regression in R
E(X) = a
0+
a
1
X
1+
a
2
X
2+
a
3
X
3+
a
4
X
4
Q (
demand_Maa)
=
a
0+
a
1
(own_price
)+
a
2
(
compe_price)+
a
3
(
inc_per_capita)+
a
4
(
pro_exp)

Q2. Analyze the estimated demand function and calculate the elasticities of
demand for Hind Oil Industries product. What do these calculations suggest

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- Summer '17
- Supply And Demand, Hind Oil Industries, Hind Oil Industries Demand Analysis