Integrating problem

Integrating problem

15. Integrating problems Starting with the data from problem 6 and the data on the price of a related commodity for the years 1986 to 2005 given below, we
estimated the regression for the quantity demanded of a commodity (which we now label Qx) on the price of the commodity (which we now label Px), consumer income
(which we now label Y), and the price of the related commodity (Pz), and we obtained the following results. ( if you can , run this regression yourself: you should
get results identical or very similar to those given below) year 1986 1987 1988 1989 1990 Pz ($) 14 15 15 16 17 Year 1991 1992 1993 1994 1995 Pz ($) 18 17 18 19 20
Year 1996 1997 1998 1999 2000 Pz($) 20 19 21 21 22 Year 2001 2002 2003 2004 2005 Pz($) 23 23 24 25 25 Qx = 121.86-9.50Px + 0.04Y “?o 2.21Pz (-5.12) (2.18) (-.68) R2
+ 0.9633 F=167.33 D-W =2.38 (a)Explain why you think we have chosen to include the price of cpmmdity Z in the above regression. (c) What type of commodity is Z?
Can you be sure? Data from table problem 6 Year Y X1 X1 1986 72 $10 $2000 1987 81 9 2100 1988 90 10 2210 1989 99 9 2305 1990 108 8 2407 1991 126 7 2500 1992 117 7
2610 1993 117 9 2698 1994 135 6 2801 1995 135 6 2921 1996 144 6 3000 1997 180 4 3099 1998 162 5 3201 1999 171 4 3308 2000 153 5 3397 2001 180 4 3397 2002 171 5
3501 2003 180 4 3800 2004 198 4 3896 2005 189 4 3989 P15(b) is to evaluate the above regression results in terms of the signs of the coefficients, the statistical
significance of the coefficients and the explanatory power of the regression (R2) The number in parentheses below the estimated slope coefficients refer to the
estimated t values. The rule of thumb for testing the significance of the coefficients is if the absolute t value is greater than 2, the coefficient is
significant, which means the coefficient is significantly different from zero. For example, the absolute t value for Px is 5.12 which is greater than 2, therefore,
the coefficient of Px, (-9.50) is significant. In order words, Px does affect Qx. If the price of the commodity X increases by $1, the Quantity demanded (Qx) will
decrease by 9.50 units.

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