Given below is a cross-section data from 30 college canteens serving pre-packaged pizza. The demand for pizza (Y) is found to be a function of price of pizza (P), tuition fees in the college (F) , price of 1 litre fresh juice in the canteen (Pj) and the location of the college, (L). The variable L takes only two values: 1, if a college in a large city and 0, otherwise.
Q1. Assuming .a linear relationship between the dependent variable and all the independent variables, estimate the demand function for pizza. If you are putting any extra information in your estimation, make sure you explain those. Mention the software you have used in estimating this linear relationship.
Q2. Calculate the following point-price elasticities: 1. price elasticity of demand, 2. tuition elasticity, 3. cross price elasticity (with change in juice price) at the following values of the variables P = 100, F = 14, Pj = 110, L = 1.
| College |
Quantity (Y) |
Price (P) |
Tuition Fees (F) |
Price of Fresh Juice (Pj) |
Location(L) |
| 1 |
10 |
100 |
14 |
100 |
1 |
| 2 |
12 |
100 |
16 |
95 |
1 |
| 3 |
13 |
90 |
8 |
110 |
1 |
| 4 |
14 |
95 |
7 |
90 |
1 |
| 5 |
9 |
110 |
11 |
100 |
0 |
| 6 |
8 |
125 |
5 |
100 |
0 |
| 7 |
4 |
125 |
12 |
125 |
1 |
| 8 |
3 |
150 |
10 |
150 |
0 |
| 9 |
15 |
80 |
18 |
100 |
1 |
| 10 |
12 |
80 |
12 |
90 |
1 |
| 11 |
13 |
90 |
6 |
80 |
1 |
| 12 |
14 |
100 |
5 |
75 |
1 |
| 13 |
12 |
100 |
12 |
100 |
1 |
| 14 |
10 |
110 |
10 |
125 |
0 |
| 15 |
10 |
125 |
14 |
130 |
0 |
| 16 |
12 |
110 |
15 |
80 |
1 |
| 17 |
11 |
150 |
16 |
90 |
0 |
| 18 |
12 |
100 |
12 |
95 |
1 |
| 19 |
10 |
150 |
12 |
100 |
0 |
| 20 |
8 |
150 |
10 |
90 |
0 |
| 21 |
9 |
150 |
13 |
95 |
0 |
| 22 |
10 |
125 |
15 |
100 |
1 |
| 23 |
11 |
125 |
16 |
95 |
1 |
| 24 |
12 |
100 |
17 |
100 |
0 |
| 25 |
13 |
75 |
10 |
100 |
1 |
| 26 |
10 |
100 |
12 |
110 |
1 |
| 27 |
9 |
110 |
6 |
125 |
0 |
| 28 |
8 |
125 |
10 |
90 |
0 |
| 29 |
8 |
150 |
8 |
80 |
0 |
| 30 |
5 |
150 |
10 |
95 |
0 |