MANAGERIAL ECONOMICS ASSIGNMENT

ACCOUNTING GROUP THREE AND ADMINISTRATION GROUP THREE

NOTE: THIS ASSIGNMENT SHOULD BE SUBMITTED IN GROUPS ON 16TH OCTOBER. IT

SHOULD BE TYPED

The demand for ethanez, a plastic container for carrying bin, is a function of the consumers’
income, advertisement, price of related good (wooden basket) and price of ethanez. The equation
below summarizes the above information.
Q E=β 0 + β 1 P E + β 2 A+ β3 PW + β 4 M + ε

Where Q E = demand for ethanez P E = price of ethanez M = consumers’ income

A = expenditure on advertisement PW = price of wooden basket (related good)

Demand for Price of Income Advertisemen Price of Wooden basket

Ethanez Ethanez t
400 60 800 50 45
450 58 600 60 55
500 55 400 80 60
600 53 370 120 65
700 50 350 150 70
900 45 320 200 75
1200 42 300 250 80
1500 40 280 300 90
2000 37 250 350 95
2400 36 220 400 100
2700 32 200 420 110
3000 30 180 450 130
3500 26 150 500 150
4000 24 120 550 170
4500 20 100 600 190

a) Run a regression for the information above and report the result in a form of the equation
above.
b) Interpret the coefficients for the variables
c) Is ethanez a giffen good? Explain your answer
d) If the income of the consumer rises by $200, what do you expect to happen to demand for
ethanez
e) Is ethanez a luxury good or a basic necessity?
f) Interpret the coefficient of determination.
g) Using the P-values, which of the variables are significant.