Essays on The Demand for Drink and Tobacco Assignment

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The paper "The Demand for Drink and Tobacco" is a great example of a finance and accounting assignment. Table 1 presents the descriptive statistics for our variables of interest. The only point of concern that may arise in this situation is that all the variables reflect some degree of skewness which violates the normality assumption. Additionally, the fact that the number of observations is only 45 may also be a point of concern since this can lead to small sample bias. From table 2 we find that the estimated coefficients for both P and X are significantly different from zero (evident from the t-statistic).

G however is not a significant determinant of Q. The coefficients reflect that the demand for drink and tobacco is negatively influenced by the price of the items and positively influenced by the total consumer expenditure. The coefficient on G is also negative but since it is not significantly different from 0 at the 5% level, we conclude that it does not have an influence on drink and tobacco demand. Thus, our results imply that an increase in the prices of drinks and tobacco will lead to a reduction in its demand while an increase in overall consumer expenditure leads to an increase in the demand.

5. Attempting to include all four dummies leads to perfect multicollinearity. Thus we modify the equation and include dummies for the 1st 3 quarters only. Table 3 presents the results. Here is strong evidence of seasonal fluctuations among the Q and X series. This is visible in the oscillatory patterns that these series seem to follow. The series P and G exhibit no seasonal patterns.

Additionally, all the series reflect a steady upward trend. Therefore the inclusion of seasonal dummies is important since our dependent variable Q does exhibit seasonal fluctuations. Additionally, the dummies would be important for the explanatory variable X. Observe from the table above that inclusion of the seasonal dummies leads to all the independent variables becoming significant. As we found in the previous section, P and G have negative impacts on the demand while X has a positive impact here.

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