Effect of prices and advertising on demand for butter and margarine in Republic of Ireland 1972-1977

By the use of regression analysis the effect of price changes on demand for butter and margarine in the Republic of Ireland was investigated and price elasticities calculated. In the period 1972-77 there were two distinct phases, one of rapidly rising prices and one of moderate increases. The results indicated that the demand response in the period of rapidly rising prices was much greater, with an own-price elasticity for butter and margarine close to -0.5 compared with figures close to nil in the other period. The effects of advertising on demand were also investigated. In most equations no statistically significant effect was apparent though the difference in volume of advertising of the two products was a significant factor affecting margarine sales in the period of moderate price increases.