b. An economist wants to investigate the factors that affect household food expe
ID: 3318209 • Letter: B
Question
b. An economist wants to investigate the factors that affect household food expenditure. Data from 50 households were collected and processed in Minitab. The regression model is specified below and the Minitab output is presented in Output 5. where E Household Food Expenditure ($'000) X, Household Income X2 = Size of Household X, Inflation Output 5 Coef 5.95 1.95 2.33 0.45 StDev 0.77 0.035 0.8 0.23 t-ratio 2.76 3.64 3.2 1.44 Predictor 0.004 0.000 0.002 0.021 Constant X2 X3 R-sq = 98% R-sq (adj) = 98% Analysis of Variance DF 288 195 483 MS 96 4.239 22.65 0.00 Regression Error Total 46 49 ©The University of the West Indies Course Code: ECON 1005 2016.... page 7 Distinguish between the dependent variable and the independent variables in this output. 12 marks) [1 mark] 3 marks] [2 marks) [4 marks] 3 marks] 3 marks) i. i. Write out the regression equation. iii. Is the coefficient 1 significant? iv. Interpret the value of the coefficient 3. v. Is significantly different from 2. Ovi.Perform the F test vi. Give an interpretation for R-sq and comment on its value. vili. Using the correlation output below, comment on the relationships among the variables 3 marks) Correlation Output X, 0.30 0.89 0.78Explanation / Answer
1) Dependent = household food expenditure
Independent = income, size of household, inflation
2) Equation:
0.45 is negative or positive? (not clearly visible)
Expenditure = 5.95 + 1.95 * income + 2.33 * household size + 0.45 * Inflation
3) p < alpha
Null rejected and thus significant
4) B3 coef = 0.45 or - 0. 45
If it is 0.45 then, 1 unit increase in inflation increases expenditure by 0.45 units
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