ECON722 Assignment 2016

Write a report looking at the demand for Ham. The report must answer the specific questions which are set out below. The file ‘Meat_Data.xlsx’ located in the “Assignment” folder on VITAL contains data that you will need to use.

 

 

Section 1 question (10 marks)

 

In the tutorial classes you constructed, using Excel, a simple linear regression model of the demand for beef. The model was of the form:

 

Where:

Q_B was defined as the quantity (volume, 2001=100) of beef (all beef);

P_B was defined as the average price ($/lb) of beef (all beef).

 

Now, using the data provided, estimate the demand for Ham for the time period January 2001 to April 2008:

 

Where:

Q_L           is the quantity (volume, 2001=100) of Ham (all Ham)

P_L            is the average price of Ham (all Ham) ($/lb)

 

State your demand equation and what it shows (including any statistical issues (if relevant) with the model).

 

 

Section 2 question (15 marks)

 

1. Explain the difference between arc and point elasticity of demand. Why do economists calculate elasticity?

 

2. Assume that the price of Ham is $2.00/lb currently. Using your regression model calculate the arc and point elasticity of demand if the price of Ham rises by 10%. [Remember to show workings!]

 

 

Section 3 question (10 marks)

 

Using your estimated linear demand equation obtain the equations for total and marginal revenue. [Remember to show workings!]

 

Using your estimated demand equation obtain the equations for total and marginal revenue. Assuming that the total cost of producing Ham is $1.50 per pound (lb) produced, calculate the quantity and price a monopolist would set to maximise profit – i.e. by finding the price and quantity that would maximise profit in the market. [Remember to show workings!]

 

 

 

Section 4 question (20 marks)

 

Using the data provided, and adding data for personal disposable income (as shown in Workshop 2) estimate the demand for Ham for the time period January 2001 to April 2008 where:

 

 

Where:

Q_H           the quantity (volume, 2001=100) of ham (all ham)

P_H           is the average price of ham (all ham)) ($/lb)

P_T            is the average price of turkey (all turkey) ($/lb)

P_L            is the average price of lamb (all lamb) ($/lb)

P_P            is the average price of pork (all pork) ($/lb)

P_B            is the average price of Beef (all beef) ($/lb)

Y              is disposable personal income

 

1. Briefly describe what the demand equation you have calculated shows (including any statistical issues (if relevant) with the model).

 

1. Explain the statistical difficulties that economists face in attempting to estimate demand functions using regression analysis.

 

 

Section 5 question (16 marks)

 

Consider the impact of other meats on the demand for ham by using your estimated regression model to calculate the cross price elasticity of demand with respect to:

 

1. the price of turkey
2. the price of lamb
3. the price of pork
4. the price of beef

 

In each case, identify whether the meats are substitute or complementary goods. [Remember to show workings!]

 

 

Section 6 question (4 marks)

 

Using your estimated demand function calculate the income elasticity of demand. Based on your findings determine what economic class of good ham is (e.g. is it normal, luxury, inferior?). [Remember to show workings!]

 

 

Section 7 question (15 marks)

 

Does this estimated demand equation fully explain the demand environment for ham? If not, what else should be considered? [Here you will need to do your own research of literature concerning the demand environment for ham and/or you may want to amend your model].

 

Final Note: A further 10 marks are reserved for presentation and coherence of the report (i.e. think about the reader and include an introduction and conclusion and diagrams/ plots where informative).

Guidance Notes

 

Coursework length:

 

The recommended length of coursework is around 3,000 words. The maximum length of the coursework component is 3,500 words and includes tables, figures, footnotes etc. (but excluding appendices). Any coursework exceeding 3,500 words will incur a penalty of 5% deducted from the coursework mark for every thousand words or part thereof exceeding the maximum length. Anything you feel relevant for the reader that you cannot include in the main report should be provided in your report appendix (which is not included in the word count).

 

 

Presentation:

 

• You can use the report template provided which represents a minimum standard of organization, you are free to improve upon it according to your own style and tastes.
• You need to report formulae used when calculating elasticities of demand and the maximisation problem and unlike a business report in the real world, you MUST SHOW YOUR WORKINGS (marks cannot be given for figures from sections 2,3,5&6 copied from excel).
• You must use word’s equation editor to write any formulas (a demonstration will be given).
• Do not forget to reference any data or sources correctly!

 

 

The coursework requires dual submission:

 

Each group must submit a hard (paper) copy to the Student Support Office (post in one of the white submission boxes outside the office) before 12Noon on Friday 18^th March 2015.

 

A soft copy of the coursework must also be submitted using the Turnitin electronic drop-box in the “assessment” folder of the ECON722 VITAL website. Turnitin is a plagiarism and collusion detection system. If you do not submit to Turnitin your work will not be marked. Failure to submit an identical version via Turnitin compared to the hard copy will attract a penalty of 10 marks.

 

Penalties for late submission, plagiarism and exceeding the acceptable word limit will apply. Please check your module handbook/postgraduate student handbook for more details.

 

 

Group working:

 

The coursework accounts for 20% of your final mark for the module. The standard group working policy applies (again please check the postgraduate student handbook for details). No ‘free-riding’ is tolerated in this module, likewise students are expected to manage their team working effectively. In the case of team disputes, please look at the ‘Yellow card/ red card’ system outlined and included in the Assessment section of VITAL. All disputes must be reported to the module leader. The module leader will act as full and final arbitrator

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