Question

1. After learning the basic estimation techniques in CH 4, which of the following regression models will you choose to explore how population and income determine the demand on pizza and obtain the estimation of “constant” income elasticity of demand on pizza? Please brief explain your choice.

• Simple linear model

• Multiple linear model

• Quadratic model

• Log-linear model

Answer 1

Ans:-

The demand of pizza can be determined by the multiple regression model. There are multiple variables that have to be taken into consideration for estimating the demand. For example, the budget constraint of the population determine the amount of money people can spend on buying pizza. Pizza can be subtituted by number of products if the price of pizzas increases. Even prices of those goods have to be taken into consideration. The income of the population affects the demand for pizza, as pizza is a normal good. As the income increases the people will demand more and more of pizzas as much as they can afford within the budget constraint.