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    Regression Anaylsis

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    1. Suppose

    QD= 60 - 50PC

    QS= -66 + 90PC

    (a) Calculate the equilibrium price and quantity.

    2. Interpret the results: of the following

    Mutiple R 0.980
    R square 0.961
    Adjusted R square 0.952
    Standard error 5.255
    Observations 12.000

    (i) determine significance of the model; (ii) determine significance of individual coefficients; (iii) compute elasticities; and (iv) interpret them.

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    Solution Preview

    1. QD= 60 - 50PC and QS= -66 + 90PC
    At equilibrium QD=QS
    so we have 60-50PC = -66+90PC
    60+66 = (90+50)*PC
    Not substitute the value of PC to get the value of Q
    Thus, equilibrium price is $0.90 and equilibrium quantity is 15.

    2. (i) determine significance of the model;
    Look at the ANOVA table,
    Degrees of Sum of Mean Significance
    Freedom Squares Square F-statistic of F-statistic
    Regression 2.000 6051.510 3025.755 109.589 0.000000481
    Residual 9.000 248.490 27.610
    Total 11.000 6300.000

    The F-statistics is 109.589 and the p-value for F-test is 0.000000481. Since the value of p is less than 0.01, we conclude that the model is significant at 1% significance level. The regression model as whole is statistically ...

    Solution Summary

    The equilibrium price and quantity are calculated.