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Regression Analysis

Given cellar capacity constraints, The Kalamazoo Brewing Company (KBC) currently sells its microbrews in a seven-state area. The company's marketing department has collected data from its distributors at each state. Data on the quantity and price (per case) of microbrews sold in the state of Ohio, as well as the average income (in thousands of dollars) of consumers living in the state of Ohio is given in the file attached to this assignment under the file name Ohio-KAZ.xls. Assuming that the underlying demand relation is a linear function of price and income, use Excel program to estimate of the state's demand for KBC microbrews in Ohio. Print (past) the computer regression output and provide an economic interpretation of the regression results. (Note: Reporting the results and providing correct and full economic interpretation of the results is as important, if not more important, as estimating the relationship)


Solution Preview

Please see the attached file for better understanding of regression results.


Interpreting Signs and Regression coefficients

Negative sign of P variable indicates an inverse relationship between price and Quantity demanded. An increase in price will decrease the demand and a decrease in price will increase the demand. For a unit increase (1 dollar) in price will result decrease of 2.476738768 units of quantity demanded. Similarly a unit decrease in price will result increase of 2.476738768 quantity demanded.

A positive sign for I variable shows product is normal or ...

Solution Summary

Solution carries out regression analysis to establish a linear relationship between quantity, price and average income level. Regression results are also explained in detail.