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Question: Ann runs one of two pizza delivery firms in a small town. The following data are records of her sales and price/ pizza for the last 24 months. Also included are the average income in the town, the price that Al's Pizza (her competitor) charges for pizza, and the price of a Big Mac at the local McDonald's.
Estimate a linear demand function for Ann's pizza. Then answer the following question based on your regression output. Type your answers into a text box in your Excel file and submit.
- Is Ann's pizza a normal or an inferior good? Explain how you know.
- Do customers view Ann's pizza as a substitute for Al's pizza? Explain how you know.
- Do customers view Ann's pizza as a substitute for McDonald's Big Mac? Explain how you know.
Note: Your answers must be supported by your Excel file with regression analysis.
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