please answer 7 Question 6 Consider the following model: what is the OLS estimat

Question

please answer 7

Question 6 Consider the following model: what is the OLS estimator for ?? what does this imply for the R2 of the regres- sion? Question 7 Using observations for 100 families on annual income and consumption (both measured in dollars), the following equation is obtained: cons-124.84 +0.853inc n 100, R2 0.692 1. What is the interpretation of the slope of this regression? 2. Interpret the intercept, and comment on its sign and magnitude. 3. What is the predicted consumption when family income is $30, 000? 4. How much of the variation in consumption can be explained by income?

Explanation / Answer

Ans 7/1)

Slope tells us if income increases by 1 unit then consumption will increase by 0.853 units

Ans7/2)

In presence of no income consumption will aliways be eqial to -124.84 units

Ans7/3)

if inc=30000

then predicted consumption is =-124.84+0.853(30000)=$25465.2

Ans7/4)

this can be explained with the help of R^2 as in our case income can explain about consumption by 69.2%

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