Soft Drink Demand Estimation

CASE STUDY: SOFT DRINK DEMAND ESTIMATION

Demand can be estimated with experimental data, time-series data, or cross-section data. Sara Lee Corporation generates experimental data in test stores where the effect of an NFL-licensed Carolina Panthers logo on Champion sweatshirt sales can be carefully examined. Demand forecasts usually rely on time-series data. In contrast, cross-section data appear in Table 1. Soft drink consumption in cans per capita per year is related to six-pack price, income per capita, and mean temperature across the 48 contiguous states in United States.

1. Estimate the demand for soft drinks using a multiple regression program available on your computer

SPSS Output:

|Coefficientsa |

|Model |

|Model Summary |

|Model |

The estimation soft drink demand is:

Y = 514.267 - 242.971 PRICE + 1.224 INCOME + 2.931 TEMPERATURE

.

2. Interpret the coefficients and calculate the price elasticity of soft drink demand

Output from SPSS

|Coefficientsa |

|Model |

Interpreting the coefficients

Price : Significant effect on expected demand for soft drink

Income : Insignificant effect on expected demand for soft drink

Temperature : Significant effect on expected demand for soft drink...