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Linear Demand Regression Analysis

A linear demand regression model found the following:

Ordinary Least Squares Estimates


Dependent Variable : QUANTITY

Independent variable : Coefficient t-statistic

Constant 10 2.5

- PRICE -2 1.3

- INCOME 3 4.0

Observations 35

Adjusted R-Square 0.6320

Estimated F = 7.960

Critical t value (95% Confidence Level) 2.042

Critical F value (95% Confidence Level) 4.17

- Write the demand function as an equation (quantity as a function of price)
- Explain the relationship between each independent variable and quantity demanded.
- If Price = 5 and Income = 12, what is the predicted quantity sold?
- Using 95% confidence level criterion, which independent factors have an influence on demand?
- Test the hypothesis that the coefficient of Income is equal to 0. Can you reject this hypothesis?
- What share of overall variation in demand is explained by the regression equation?
- What share is left unexplained?

Solution Summary

The solution provides step by step method for the calculation of regression model. Formula for the calculation and Interpretations of the results are also included.