applied economics on STATA

1. You will find the data for this question in a file called butter.dta. These are aggregate monthly data on butter and margarine purchases. For this exercise, please submit the log file of your work in STATA, in addition to your written answers to the questions below.

   (a) Use the data to estimate a double log demand equation for butter. What are the advan- tages and disadvantages of this functional form?
   (b) Howdoyouinterpretyourestimateoftheincomeelasticity-isitsignificantlydifferent from one?
   (c) Does the own-price elasticity make economic sense? Do butter and margarine appear to be complements or substitutes?
   (d) Test whether the demand for butter differs during the summer months and interpret your results.
   (e) Does advertising have any significant impact on demand for butter? Can you explain this economically?
   (f) Repeat your analysis for margarine rather than butter and comment on whether the results are compatible with those obtained for butter.

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