2 (15 points) Consider the following estimated regression equation for the deman

Question

2 (15 points) Consider the following estimated regression equation for the demand for fish (standard errors in parenthesis) in 60 regions. Fish and beef are expected to be substitutes meaning that as the price the quantities of fish fall (other things constant). of beef rises Model : FISH, 43.5-2.5 PF-0.75 PB,+ 20.3 Y (0.55) (0.60) (7.4) 0.58 n- 60 where, FISH, pounds of fish (millions of pounds) in market i PE = price of fish per pound (in dollars) in market i PB, price of beef per pound (in dollars) in market i PC, price of chicken per pound in dollars) in market i Y,-average real disposable income (S000's) in market i What are the expected signs on the coefficients of PF, PB, and Y? b. Do the coefficients have the expected signs? e What will be the degrees of freedom and critical value for a two-sided hypothesis test of a coefficient at a 5% significance level?

Explanation / Answer

solving first 4

a)

pB as price of beef increases the demand of fish should increase as fish is a protien substitue to beef so sign should be positive

PC s price of chicken increases the demand of fish should increase as fish is a protien substitue to beef so sign should be positive

PF s price of fish increases the demand of fish should decrease people would look for other options so sign should be negative

Y as income increases more people can buy fish so demand should increase so sign should be positine

b)

pb was expected to be positive but it's not

rest are as expected

c)

n =60

k =3

so df= 60-3-1 = 56

as df >30 w ecan assume a normal distribution so critical value at 5% is 1.96

d)

as pC is not invloved in the equation so beta for PC is 0

as critical value is 1.96,

the z score for bPC is 0

as 0<1.96 we fail to reject the null of bPC =0

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