A quant jock from your firm used a linear demand specification to estimate the d
ID: 3439440 • Letter: A
Question
A quant jock from your firm used a linear demand specification to estimate the demand for its product and sent you a hard copy of the results. Unfortunately, some entries are missing because the toner was low in her printer. Use the information presented below to find the missing values. Then, answer the accompanying questions. a. Based on these estimates, write an equation that summarizes the demand for the firm's product. b. Which regression coefficients are statistically significant at the 5 percent level?Explanation / Answer
summary output
R square = (multiple R square)^2
= 0.38*0.38= 0.1444
Adjusted R square = (1-R square)*(N-1) / (N-p-1)
Where N= Total number of observation (=150) and p= Total number of estimators (=2)
Thus Adjusted R square =(1-0.1444)8(150-1) / (150-2-1)
=0.8672
Analysis of variance table
Total degree of freedom= regression degree of freedom + residual degree of freedom
= 147+2
=149
Sum of square for rgression = total sum of square -residual sum of square
=73807.49-63408.62
=10398.87
Cofficient table
standard error for intercept = estimated value of intercept / t statistic value corrosponding to intercept
= 58.87 / 3.84
=15.33073
t statistic value for price estimate = coefficient value of price / standard error of price estimate
=-1.64/0.85
=-1.92941
cofficient value of income = t statistic value corrosponding to income *standard error of income
=4.64*0.24
=1.1136
a)
Regression equation for demand can be summarized as
Qxd= 58.87 - 1.64 * Px + 1.11 * M
Where
Px = variable represents price
M= variable represents income
b)
If the p value observed for the coefficient value is less than 0.05, variable corrosponding to the perticular coefficient will be statistically significant.
As p value observed for intercept coefficent and income coefficient is less than 0.05, thus it can be said that income and intercet value are statistically significannt.
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