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# SOFT DRINK DEMAND State Annual Price per Income per Mean Temp Cans per Capita Six Pack Capita Alabama 200 2.19 13 66 Arizona 150 1.99 17 62 Arkansas...

Soft Drinks

Demand can be estimated with experimental data, time-series data, or cross-section data. Sara Lee Corporation generates experimental data in test stores where the effect of an NFL-licensed Carolina Panthers logo on Champion sweatshirt sales can be carefully monitored. Demand forcasts usually rely on time-series data. In contrast, cross-section data appears in Table 2. Soft drink consumption in cans per capita per year is related to sic-pack price, income per capita, and mean temperature across the 48 contiguous states in the United States.

Questions

1. Write the theoretical demand model for soft drinks, stating the expected relationship between the quantity demanded and its determinants.

2. Estimate the demand for soft drinks using the data in Table 2 and write the equation for the estimated model.

3. Interpret the coefficients of the determinants of soft drinks.

4. Which determinants are statistically significant at the conventional level of significance of ex= .05?

5. a) Calculate the price elasticity demand for soft drinks in Tennessee using the price in Tennessee and average per capita quantity.
b) Should the industry raise or lower price in order to increase revenue?

SOFT DRINK DEMAND State Annual Price per Income per Mean Temp Cans per Capita Six Pack Capita Alabama 200 2.19 13 66 Arizona 150 1.99 17 62 Arkansas 237 1.93 11 63 California 135 2.59 25 56 Colorado 121 2.29 19 52 Connecticut 118 2.49 27 50 Delaware 217 1.99 28 52 Florida 242 2.29 18 72 Georgia 295 1.89 14 64 Idaho 85 2.39 16 46 Illinois 114 2.35 24 52 Indiana 184 2.19 20 52 Iowa 104 2.21 16 50 Kansas 143 2.17 17 56 Kentucky 230 2.05 13 56 Louisiana 269 1.97 15 69 Maine 111 2.19 16 41 Maryland 217 2.11 21 54 Massachusetts 114 2.29 22 47 Michigan 108 2.25 21 47 Minnesota 108 2.31 18 41 Mississippi 248 1.98 10 65 Missouri 203 1.94 19 57 Montana 77 2.31 19 44 Nebraska 97 2.28 16 49 Nevada 166 2.19 24 48 New Hampshire 177 2.27 18 35 New Jersey 143 2.31 24 54 New Mexico 157 2.17 15 56 New York 111 2.43 25 48 North Carolina 330 1.89 13 59 North Dakota 63 2.33 14 39 Ohio 165 2.21 22 51 Oklahoma 184 2.19 16 82 Oregon 68 2.25 19 51 Pennsylvania 121 2.31 20 50 Rhode Island 138 2.23 20 50 South Carolina 237 1.93 12 65 South Dakota 95 2.34 13 45 Tennessee 236 2.19 13 60 Texas 222 2.08 17 69 Utah 100 2.37 16 50 Vermont 64 2.36 16 44 Virginia 270 2.04 16 58 Washington 77 2.19 20 49 West Virginia 144 2.11 15 55 Wisconsin 97 2.38 19 46 Wyoming 102 2.31 19 46

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SUMMA
RY
OUTPUT Regression Statistics
Multiple
R 0.83314
1872 R
Square 0.69412
R
Square 0.67327
0291 Standard
Error 38.5072
7293 Observat
ions 48 ANOVA
df SS MS F 3 148058.
2737...

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