# Soft Drink Case Study 1

Pages: 3 (910 words) Published: March 11, 2012
Group Assignment 1 – Soft Drink Case Study

Economics 3315: Managerial Economics

Case 1: Soft Drink Case Study
A study on soft drink consumption across the 48 contiguous states in the United States was conducted. The attached dataset describes the consumption across the US. There are 48 elements which are the states and 4 variables which are Cans/Capita/Yr, 6-Pck Price, Income/Capita, and Mean Temp. Out of these variables, we have dependent and independent variables. In this study, Cans/Capita/Yr is the dependent variable, while 6-Pack Price, Income/Capita and Mean Temp are the independent variables. During the analysis, the data was manipulated to see how the independent variables affect each other and the dependent variable. This case study will determine the estimated demand for soft drink consumption, interpret the associated coefficients, and calculate the price elasticity of soft drink demand at the mean. 1. Estimate the demand for soft drinks.

Multiple Regression Equation (Theoretical):
soft drink demand = 514.27 - 242.97 *6-pack price +1.36 *income + 2.93 *mean temp+ e Multiple Regression Equation (Estimated):
soft drink demand = 514.27 - 242.97 *6-pack price +1.36 *income + 2.93 *mean temp 2. Interpret the coefficients and calculate the price elasticity of soft drink demand at the mean (use the mean values of the independent variables to make a prediction on quantity demanded of soft drinks. Use that value when computing the price elasticity of soft drink demand at the mean. The price of soft drinks is an inverse determinant of the quantity demanded for soft drinks. In other words, price is indirectly related to the quantity demanded for soft drinks. As the price of soft drink changes, the quantity demanded for soft drinks will change in the opposite direction. A unit change in price will result in a change in the demand for soft drinks of 242.97 in the opposite direction. Income is directly related to the quantity demanded for soft...