Bachanta Mexican (BM) has collected data on price ($ per
burrito) and quantity (of burritos) sold over the last ten years.
The firm has also collected data on the price ($ per slice of
pizza) charged by Luciano's Pizza (LP) and the percentage change of
growth in consumer income. The data are as follows below in the
table: Provide a linear regression and the price elasticity of
demand.
a. Interpret the R2 and the F statistics and Provide a
95% confidence interval for bottle sales if burrito price is $3,
pizza price is
$4, and income growth is 2(%).
b. According to your results, are burrito and pizza substitutes or
complements? Can you be 99% confident? Explain. Is burrito a normal
or inferior good? Can you be 95% confident? Explain.
c. You wish to estimate the demand for burrito Q =
αPbmβ1 Plpβ2. (Note
that you are not including income in your multiplicative demand
model.)Provide the appropriate regression results. Provide the
values for α, β1, and β2 that you would insert in Q =
αPbmβ1 Plpβ2.
Year
Quantity
Price
Price CC
Income Growth
1
33,500
4.40
4.09
-1
2
92,600
4.79
3.56
3
3
32,400
4.08
4.15
1
4
81,700
3.47
4.18
0
5
144,800
2.06
4.33
2
6
114,300
3.74
3.58
1
7
156,600
3.11
3.75
4
8
158,000
2.29
3.95
0
9
58,100
3.24
4.39
3
10
135,000
2.10
4.45
4
Bachanta Mexican (BM) has collected data on price ($ per burrito) and quantity (of burritos) sold over the last ten year
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