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Relationship Between Vehicle Miles Traveled and Fuel Price

Please see the attached files.

State the null and alternative hypotheses and the theories that support these hypotheses that will be tested. You should also present the methodology that will be used to test these hypotheses.

Dependant Variable: Vehicle miles traveled in the U.S. is directly affected by:
Independant variable: The price of fuel.

In essence what we are trying to prove is that as the price of fuel increases, the number of miles traveled decreases.


Solution Preview

Please see the attached file.

Relationship Between Vehicle Miles Traveled and Fuel Price

1. Introduction
Fuel is a major component of household expenditure in US, which accounts for a substantial portion of the income of the households. An increase in the fuel price results in increases the amount of expenditure households are doing on traveling. This would result in substitution effect and household is likely to decrease the vehicle miles they are traveling. Therefore, we expect the vehicle miles traveled to be negatively related to the fuel price. This project is to study the impact of increase in fuel price on the vehicle miles traveled in the US economy.

2. Model Development
The model is simple regression where the dependent variable is vehicle miles traveled and the independent variable is fuel price.
The model developed for testing is as:
Vehicle Miles = ¦(Fuel Price)

Where Vehicle Miles is the vehicle miles traveled in the US economy trillion of miles and Fuel price is the average fuel price in $.
¦ could take any form, however, the simplest function is linear function, therefore, it is assumed that the relationship between the variables is linear and the model is simple linear regression model. Thus, the final model to be tested is

Vehicle Miles = a0+a1 * Fuel Price
Null: a1=0 (there is no ...

Solution Summary

This post presents a comprehensive model research paper using regression analysis and hypothesis testing. The post contains a sample report with approx 900 words and Excel sheet with all calculations. The solution starts with setting the context for the problem, model development, data collection, results, discussions and conclusions. This post will act as a guide for the students to understand how they can take up a new research issue and do the same process in a systematic way.