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
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?
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.