Estimate the demand function for oranges in china/ Econometrics
Shanghai Fruit Company produces and sells oranges in China. A marketing analyst collected data on price and quantity demanded for oranges from 2009 to 2011. The data are summarized in the following table:
Year P Q
2009 1 9
2010 2 7
2011 3 5
Where,
P is price of oranges (Yuan/Kg), and Q is quantity sold (Kg).
a. Estimate the demand function for oranges in China; that is, 0 1 Q = ? + ? P ;
b.Compute price elasticity of demand for oranges at the mean of the data;
c.In order to enhance total revenue from selling oranges, would you recommend a decrease in price of oranges? Why?
d. Calculate price elasticity of revenue;
e.What would be the effect of a 3% increase in price of oranges on total revenue?
f.What would be the effect of 2 % decrease in price of oranges on total revenue?
