MANAGERIAL ECONOMICS

Demand Estimation

Data

The data represents the demand for single family housing in a metropolitan area from 1985 - 2014.  The data are also given in a table below, and are coded as follows:

! Quantity = quantity of single family housing units sold in a year

! Population = population of the metropolitan area in thousands

! Price = average price of single family housing per square foot

! Income = median income in the area

! Rent = average rent for apartments in the area

! CPI = Consumer Price Index for the area

Analysis

1.  Use your data and a spreadsheet program to do to estimate the demand for single family housing in the metropolitan area.  You should include the following items in your analysis:

• Indicate the form of the model used, including the expected signs of the coefficients for each variable.
  
• Analyze the validity of the model, including a discussion of the t-tests, R² and adjusted R² the F-test, and t-tests.
  
• Calculate the point price elasticity, the point income elasticity, and the point cross-price elasticity for housing, using the data for the latest period. Based on the estimated elasticities, answer the following questions:

- Should a developer increase or decrease the price to increase revenue from housing?

- Is single-family housing a normal or inferior good in this situation?

- What is the relationship between single-family housing and apartments?

Final Output

Please submit a copy of your analysis in the form of a brief report along with supporting computer output by Tuesday, February 24. If the output is a hard copy, it should be typed on 8 ½ x 11 or A4 paper. Please do not submit the report in a special report cover; a stable in the upper left hand corner would be adequate. The output may also be submitted as an e-mail attachment.

In place of the (X) for quantity in 2014, use the number next to your name below: