Assume your research staff used regression analysis to estimate the industry dem

Question

Assume your research staff used regression analysis to estimate the industry demand curve for Product X. Qx=10,000-100Px+0.5Y-1000r

(3000) (20) (0.3) (105)

Where Qx is the quantity demanded of Product X. Px is the price of X, Y is income and r is the prime interest rate (given in decimals, e.g. 0.02 or 0.05) the standard error of each estimated coefficiemt is given in parenthese below it. Aslo, the following infomrmation is provided about the regression equation.

Number of observations=98

R2=0.95

F-statistic=7.5

A. What is the number of degrees of freedom?

B. What percentage of the variation in the dependent variable is explained by the equation?

C. Whic o fhte estimated coefficients are significant at the 5% level using a 2-tailed test; be sure to indicate the t-statistic for each of the coefficients.

D. Perform an F test at the 5% level of the overall explanatory power of the model.

E. If prices remain constant next year but income is expected to increase by 50 and interest rates rise by two percentage points (by 0.02), what is the xpected change in the quantity demanded?

Explanation / Answer

a)3 b)2.54 c)t-test or z-test d)it results in cricitical value region so rejected e)180

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