This tutorial is to be submitted via Turnitin by midday

This tutorial is to be submitted via Turnitin by midday

This tutorial is to be submitted via Turnitin by midday Tutorial 4This tutorial is to be submitted via Turnitin by midday on Friday 4 March.1. You will find the data for this question in a file called butter.dta. These are aggregate monthlydata on butter and margarine purchases. For this exercise, please submit the log file of yourwork in STATA, in addition to your written answers to the questions below.(a) Use the data to estimate a double log demand equation for butter. What are the advantages and disadvantages of this functional form?(b) How do you interpret your estimate of the income elasticity – is it significantly differentfrom one?(c) Does the own-price elasticity make economic sense? Do butter and margarine appearto be complements or substitutes?(d) Test whether the demand for butter differs during the summer months and interpretyour results.(e) Does advertising have any significant impact on demand for butter? Can you explainthis economically?(f) Repeat your analysis for margarine rather than butter and comment on whether theresults are compatible with those obtained for butter.1different from one?(c) Does the own-price elasticity make economic sense? Do butter and margarineappear to be complements or substitutes?(d) Test whether the demand for butter differs during the summer months andinterpret your results.(e) Does advertising have any significant impact on demand for butter? Can you2. You are given data on food expenditure, income and demographic characteristics of 150explain this economically?married couples, Repeat the husband is a margarine rather and is aged and commentsurvey(f) where your analysis for manual worker than butter 30-50. All on whetherthe results are month.interviews take place in the samecompatible with those obtained for butter.3.2 You are given and on food expenditure, income and demographicYou decide to estimate an Engel curve data regress the ratio of food expenditure to income characteristics of 150 married couples, where the husband is a manual worker and is aged(w f oy) on the logarithm of net current income (ncy), the same month.children aged 6-1030-50. All survey interviews take place in the number ofYou decide to estimate an Engel curve and indicator for London (london = 1(kids2), the number of children aged 11-17 (kids3) and anregress the ratio of food expenditure toincome (wfoy)if the couple lives in Greateron the logarithm of net current income (ncy), the number of childrenLondon, and 0 otherwise).aged 6-10 (kids2 ), the number of children aged 11-17 (kids3 ) and an indicator forLondonYour estimates are: (london=1 if the couple live in Greater London, and 0 otherwise).Your estimates are:OLS Estimation, Dependent variable is wfoy, 150 observationsVariableCoefficientStandard errorconstant0.8770.065ncy-0.1550.014kids20.0260.006kids30.1380.032london0.0470.018R20.496Mean of wfoy0.189Mean of ncy4.473(a)(b)(c)(d)(a) On the basis of the above estimates establish if food is a necessity or a luxury.(b) Establish the statistical significance of the coefficient on london.On the basis of the above estimates, establish if food is a necessity or a luxury.(c) Further, compute the income elasticity for a hypothetical couple living outsideLondon, with mean log income and no children.Establish the statistical significance of the coefficient on london.(d) It has been suggested that share of budget spent on food is a good indicator ofFurther, compute the income standard. for a hypothetical couple living outside London, onhousehold living elasticity Households spending a lower share of their budgetfood are to be no children.with mean log income and regarded as better off. If number of young children in a householdwere to increase by one, by how much would income need to rise to preserve thehousehold’s living of budgetIt has been suggested that sharestandard? spent on food is a good indicator of householdliving standard. Households spending a lower share of their budget on food are to beregarded as better off. If number of young children in a household were to increase4by one, by how much would income need to rise to preserve the household’s livingstandard?2

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