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Regression Anaylsis

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.

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
PC=126/140=0.90
Not substitute the value of PC to get the value of Q
QD=60-50*0.9=15
Thus, equilibrium price is $0.90 and equilibrium quantity is 15.

2. (i) determine significance of the model;
Look at the ANOVA table,
ANOVA
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.

$2.19