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Linear Regression – Estimating Demand Elasticities

Linear Regression – Estimating Demand Elasticities. U.S. Sugar Consumption 1896-1914 H. Schultz (1933). “A Comparison of Elasticities of Demand Obtained by Different Methods,” Econometrica , Vol.1, #3,pp. 274-308.

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Linear Regression – Estimating Demand Elasticities

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  1. Linear Regression – Estimating Demand Elasticities U.S. Sugar Consumption 1896-1914 H. Schultz (1933). “A Comparison of Elasticities of Demand Obtained by Different Methods,” Econometrica, Vol.1, #3,pp. 274-308. H. Schultz (1925). “Appendix 2,” Journal of Political Economy, Vol.33, #6, pp.634-637.

  2. Problem Description • Dependent Variable: Consumption per Capita (Q) • Independent Variables: • Real Price (P), BLS adjusted, 1913=100, all commodities • Year (t), centered around 1905 • Models: • Additive: • Multiplicative: • Linearized Multiplicative Model:

  3. Elasticities of Demand (Ignoring error terms)

  4. Effects of Time Shift (Ignoring Error terms)

  5. Data Note: On Figures 2A-2C, Schultz is using Q/10. Plots in this series are based on Q

  6. Regression – Model 1

  7. Regression – Model 2

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