n an economics class, a student was asked to determine the per person consumptio
ID: 3320423 • Letter: N
Question
n an economics class, a student was asked to determine the per person consumption of chicken in pounds (CONS) and how it is affected by per capita income in hundreds of dollars (INC), price per pound of chicken in cents (PC), and the price per pound of beef in cents (PB). She gathered the data on these variables for the years from1951 through 1994. After running the regression in Excel and testing for curvature and interaction, she obtained the final output below. Use an alpha of .05 and this output to answer the questions.
Regression Statistics
Multiple R
0.993
R Square
0.987
Adjusted R Square
0.986
Standard Error
2.004
Observations
44
ANOVA
df
SS
MS
F
Sig F
Regression
3
12031
4010.490
998.9207
0.0000
Residual
40
161
4.015
Total
43
12192
Coefficients
Standard Error
t Stat
P-value
Intercept
31.50
1.313
23.995
0.0000
PC
-0.73
0.080
-9.119
0.0000
PB
0.11
0.046
2.499
0.0167
INC
0.23
0.016
14.217
0.0000
1. Which of the following would have the greatest effect on chicken consumption?
a. A $1000 increase in people’s incomes
b. A $1000 decrease in people’s incomes
c. A 10 cent rise in the price of beef
d. A 10 cent rise in the price of chicken
2. What is the estimated chicken consumption for a year with INC = 100, PC = 15, and PB = 40?
a. 61.1
b. 47.9
c. 69.9
d. 23.9
3. If you ran the correlation coefficient between PC and PB finding that it was 0.2, what action should you take?
a. Eliminate PB
b. Eliminate both
c. Do nothing. Use the equation as it is.
d. Eliminate PC
Regression Statistics
Multiple R
0.993
R Square
0.987
Adjusted R Square
0.986
Standard Error
2.004
Observations
44
ANOVA
df
SS
MS
F
Sig F
Regression
3
12031
4010.490
998.9207
0.0000
Residual
40
161
4.015
Total
43
12192
Coefficients
Standard Error
t Stat
P-value
Intercept
31.50
1.313
23.995
0.0000
PC
-0.73
0.080
-9.119
0.0000
PB
0.11
0.046
2.499
0.0167
INC
0.23
0.016
14.217
0.0000
Explanation / Answer
1) Here using the coefficients from the table given above the effects of changes here are computed as: (Note that the variables here are given to be measured in per capita income in hundreds of dollars (INC), price per pound of chicken in cents (PC), and the price per pound of beef in cents (PB) )
Therefore the maximum effect is due to the A 10 cent rise in the price of chicken
Therefore D is the correct answer here.
2) The value here is predicted as:
CONS = 31.5 + 100*0.23 + 0.11*40 - 0.73*15 = 47.95
Therefore b is the correct answer here.
3) As the correlation coefficient here is very weak between the 2 variables that is 0.2, very close to 0, therefore there is no need to eliminate any of the variable in this case . Therefore c is the correct answer here.
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