Videos and questions for Chapter 1a of the course "Market Analysis with Econometrics and Machine Learning" at Ulm University.
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Has the relationship between price p and sold quantity q the slope that one would expect from a demand curve?
Could Emma's prices in the data reasonably have been her profit maximizing prices?
What do you think was wrong in the R code and let to the negative prices in the previous video?
Ok, let's continue and take a look at what was wrong...
Make a guess. What do you think will the relationship between prices and quantities look like if the standard deviation of the demand shock is almost zero?
In the video below, we will run the linear regression for a simulated data set where we choose profit maximizing prices instead of random prices. Do you think that our linear regression then consistently estimates the true parameters beta0=100 and beta1=-1 of our demand function?
Great, you have finished the video lecture for Chapter 1a. Note that the slides contain some additional summary of what we have done and will do next. If you have not done so, start now working on the RTutor problem set for Chapter 1a!