Part 1: Select a product or service of your choice
Part 2: Using multiple regression, estimate a demand function for your selected product or service. Use quantity demanded, Qd, as the dependent variable and price, P, and income, Y, as independent variables.
Qd = a + b1P + b2Y,
where a is the constant term, b1 is the price coefficient and b2 is the income coefficient. The standard errors of the estimates should be shown underneath the relevant coefficients. The coefficient of determination, R2, should also be clearly shown.
Part 3: Use your demand function to make predictions of the level of demand for a range of price and income values and to calculate price and income elasticities of demand.
Part 4: Discuss possible pricing strategies for firms supplying this particular product.