Suggested Solutions to Assignment 4 (Optional) - Trent University

Table 5
Quarter ln P Ln Y ln P'
1977.3 0.62 1.27 0.10
1977.4 0.55 1.28 0.08
1978.1 0.47 1.29 0.07
1978.2 0.38 1.30 0.05
By substituting the given values of the independent or explanatory variables,
t = 59, D 3 = 1, and D 1 = D 2 = 0, for the third quarter of 1977 in the estimated
demand equation, we get the third-quarter 1977 forecast of the demand for coffee of
ln Q 59 = 1.2789 − 0.1647(0.62) + 0.5115(1.27) + 0.1483(0.10) − 0.0089(59)
− 0.0961(0) − 0.1570(0) − 0.0097(1)
ln Q 59 = 1.3064. The antilog of 1.3064 is 3.69 lb.
This is the forecasted number of pounds of coffee consumed per capita for the
population over age 16 in the third quarter of 1977.
(b) By substituting the given values of the independent or explanatory variables, t = 60
and D 1 = D 2 = D 3 = 0, for the fourth quarter of 1977 in the estimated demand
equation, we get the fourth-quarter 1977 forecast of the demand for coffee of
ln Q 60 = 1.2789 − 0.1647(0.55) + 0.5115(1.28) + 0.1483(0.08) − 0.0089(60)
− 0.0961(0) − 0.1570(0) − 0.0097(0)
ln Q 60 = 1.3209. The antilog of 1.3209 is 3.75 lb.
This is the forecasted number of pounds of coffee consumed per capita for the population
over age 16 in the fourth quarter of 1977.
(c) By substituting the given values of the independent or explanatory variables, t = 61,
D 1 = 1, and D 2 = D 3 = 0, for the first quarter of 1978 in the estimated demand
equation, we get the first-quarter 1978 forecast of the demand for coffee of
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