3) What is the method of least squares minimizing! red distunes from each Sample

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3) What is the method of least squares minimizing! red distunes from each Sample data Pai n+ Question'2 35 pointeleion line. Suppose the following function has been estimated: 30-5p, where q is the quantity of gallon of milk demanded in ABC, in 1,000 gal, and P is the price of milk, in S/gal. 1) What is the expected quantity of milk 2) What is the expected quantity of milk demanded in ABC if the price of milk is SS/gal? 3) Is this estimated equation consistent with the law of supply? Law of demand? Why? 4) What is the meaning of the estimated intercept parameter? 5) What is the meaning of the estimated slope parameter? 6) What is the expected change in quantity demanded if milk price increases by $3/gal? demanded in ABC if the price of milk is $2.45/gal? 7) What is the expected change in quantity demanded if milk price decreases by $0.5/gal? Question 3 (50 points) ollowing questions refer to the research project data provide in the file ECON_492_F18_acreage_data_083018.xlsx, posted on Blackboard, in the "Research project" section. The file contains the following data: abs "2008" - "2017" County code - a numeric code assigned to each of NC counties. The correspondence hetueen runty codes and names is given in the tab "CRD_Cnty_codes"; D The corresnondence betwee

Explanation / Answer

Questions No.2)

1..)

Q = 30 – 5P

= 30 – 5(2.45)

= 30 -12.25

=17.75

2)

Expected quantity when price is $ 5/gal

Q = 30 – 5(5)

   = 30 – 25

= 5

3)

Equation is associated with law of demand. It depicts inverse relationship between price and quantity demanded. Rise in price leads to the fall in quantity demanded.

4)

Here, Intercept shows the maximum quantity that would be demanded when price falls to zero.

5)

Slope of parameter measures the sensitivity of demand with respect to change in price. 1 unit rise in price level would cause 5 units fall in demand.

6)

When price increases by $ 3, it will cause 15 units fall in quantity demanded.

7)

$ 0.5 decrease in price will lead to 2.5 units rise in quantity demanded.

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