01 A researcher estimated the residontial electricitv dora i

01. A researcher estimated the residontial electricitv dora iunction in Colombo Municipal Council area. Using data collected from 400 households the estimated demand function is Where Y is the ith household\'s monthly electricity. consumption (units), X1 is the average unit price of electricity, X2 is the household income, Xs is the size of family, X4 is the size of house (square feet), Di is the dummy for having an air conditioner, D2 is the dummy for having CFL energy saving bulbs and ui is the error term. Followings are the regression results. + 2.0451 Dit + 1.0566Dzi f = 0.56-0.2463 t=-1.87 2.97 + 0.0593X2i + 0.8501X31 + 1.2589 1.22 3.52 1.91 2.17 2.85 (0071) (0.021) (0.000) (0041) (0.280) (0.022) (0,000) R2 = 0.66 Where figures in the parentheses are the p values Suppose that you work as a researcher attached to the Ministry of Energy in Sri Lanka. Write a short report (200 words) to the secretary of the Ministry explaining the above results. (15 Marks)

Solution

The results shows the how the electricity consumption depends on the various explanatory variable. The regression here is a multiple linear relationship. The results tells that

The R² = 0.66 tells that the explanatory variable explains 66% of the variation in the explained variable