Question

Huang and others (1980) estimated the following demand for coffee: h 0,-1.279-0.1647h P+0.5115n ,0.1483h P-0.00897 -0.096D,-0.157D, +0.0097D, (-2.14) .23) (0.55) 3.36) (-3.34) (-6.03) (-0.37) Where: Q- pounds of coffee P price of coffee per pound in 1967 prices Per capita income in thousands of 1967 dollars P': Price of tea in 1967 prices T time variable 1961-quarter 1 through 1977-quarter 4 D1 Dummy variable -1 for the first quarter D2- Dummy variable -1 for the second quarter Ds Dummy variable -1 for the third quarter In - natural log. a. Interpret each of the coefficients and statistical significance of P. l. P and T b. would you conclude that the Demand for coffee is price elastic? c. Are coffee and tea substitute or complementary goods? d. Among the dummy variables, which one is the reference category? What does that mean? e. Interpret each of the dummy coefficients and their statistical significance.

Answer 1

0 Giten that he follouong demand or Cofee 3卜 where mi l cojte Per Pound 1969 Prius fper capita nCome to clollan T- time ara )for the fist quanter bum

a) Assomnthot the ata sSet s la erough, we lanumefit yee do and So, It -Volue .96 The folowing achy Seen to be StaHskcat ca,becue the 9 thec C although thir Secu to gni cant be cant

b) The demand lor Clee is pit elase b1642 Pia etasic Po Collee ts tule Theltalue 719 ineau that the quon te3 quon tes 3 Quayt t. The Salu