MANAGERIAL DECISION MAKING

Assignment 1 - Demand Estimation

Data

The data represents the demand for single family housing in a metropolitan area from 1980 - 2001.  They are entered into an Excel spreadsheet that was sent to you as an e-mail attachment.  The data is also given in a table below, and are coded as follows:

! Population = population of the metropolitan area in thousands

! CPI = Consumer Price Index for the area

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

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

! Income = median income in the area

! Rent = average rent for apartments in the area

Analysis

Use your data and a spreadsheet program to do to estimate the demand for single family housing in the metropolitan area.  Write a brief report which includes the following:

1. Indicate the form of the model used, including the expected signs of the coefficients for each variable.
   
   
2. Analyze the validity of the model, including a discussion of the R², the F-test, and t-tests.
   
   
3. Calculate the point elasticity for each of the variables, based on the data for the latest period. Use the estimated elasticities in your role as a consultant to a land development company to answer the following questions:

   a. What should the company do to the price of the houses to increase its revenue from their sale?

   b. How will a slowing in the local economy affect the demand for the housing?

   c. How significant are apartments as competition for single family housing?

Final Output

Please submit a copy of your analysis along with supporting computer output by Thursday, October 2. 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 2001, use the number next to your name below: