The New Zealand Pork Industry board has hired you to estimate a demand function for pork in New Zealand. Given time and budget constraints, you need to find a relatively simple method of estimating demand that uses readily available information. You combine information that the Pork Producers provide on per-capita pork consumption with a price index from Statistics New Zealand. The file , an Excel file on the ECON217 website, contains the data you need. Before beginning your analysis, you graph of the data, and decide that there is an increasing trend in the consumption of pork over the relevant time period. The model you decide to estimate is a single equation model of the following form:
Qt = A0 + A1Pt + A2T
where Qt is quarterly per capita consumption of pork (quarterly data).
Pt is an index of the (real) price of pork (quarterly data, June 99 = 1000)
T is a trend variable, which takes on a value of 1 in the first quarter, and increases by a step of 1 each subsequent quarter. You will have to generate this variable yourself.
a) Estimate the demand function specified above using Excel (or a similar package with regression analysis capabilities). Comment on the signs and the statistical significance of your estimated coefficients. Do they match your prior expectations? Explain why or why not.
b) How do you interpret the coefficient on the trend variable?
c) Calculate and interpret the price elasticity of demand. The elasticity can be calculated using the mean values for Quantity and Price.
Attachment:- pigmeat.xls