Po nd lar ie od ite 5 Here are the results of the regression

Po nd lar ie od ite 5. Here are the results of the regression o f the quantity demanded of product X (Qx) on its own x), consumer income (Y) and the price of a complementary good (Pz). Ox-12 1.86-9.50Px + 0.04%-2.21 Pz (-5.12) (2.18) (-0.68) N=20 Ra_ 0.9633 F= 167.33 The numbers in parentheses are t-statistics. Evaluate the results (A) in terms of the signs and values of the coefficients, (B) for the statistical significance of the coefficients, and (C) the explanatory power of the regression.

Solution

A. Interpretation of coefficients; If there is a unit increase in Px, own price, the demand for X decreases by 9.5 units (negative relationship)

If there is a unit increase in income, Y, the demand for X increases by .04 units.

If there is a unit increase in price of complementary good, the demand for X falls by 2.21 units (negative relationship)

B. Find p values from the given t statistics to test for significance;

Use a t table to find these values, and test it with 5% significance;

P value for;

Px=.00003 The result is significant at p < .05.

Y=.02102. The result is significant at p < .05.

Pz= .252353.The result is not significant at p < .05.

C. The R^2 value in this model is 96% which is very high, this means that the model explains all the variability of the response data around its mean.