Practice problems 4 (with answer key)

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Tulane University *

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Economics

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Jan 9, 2024

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Practice Problems 4 Question 1. Regression modeling is a statistical framework for developing a mathematical equation that describes how a. one explanatory and one or more outcome variables are related b. several explanatory and several outcome variables response are related c. one outcome and one or more explanatory variables are related d. All of these are correct Question 2. If the regression equation is equal to y=23.6−54.2x, then 23.6 is the _____ while -54.2 is the ____ of the regression line. a) Slope, intercept b) Slope, regression coefficient c) Intercept, slope d) Radius, intercept Question 3. A regression analysis between sales (in $1000) and price (in dollars) resulted in the following equation: Y = 50,000 - 8X The above equation implies that on average an a. increase of $1 in price is associated with a decrease of $8 in sales b. increase of $8 in price is associated with an increase of $8,000 in sales c. increase of $1 in price is associated with a decrease of $42,000 in sales d. increase of $1 in price is associated with a decrease of $8000 in sales Question 4. If the price elasticity of demand for a product is equal to 0.5, then a 10 percent decrease in price will: a) increase quantity demanded by 5 percent. b) increase quantity demanded by 0.5 percent. c) decrease quantity demanded by 5 percent. d) decrease quantity demanded by 0.5 percent Question 5. A log-log regression of Sales (Units) regressed on Price ($) gives:

log(Sales) = 13.977 – 1.415*log(Price ) What is the price elasticity of demand? Question 6. How do we interpret a dummy variable coefficient? a) The difference between two means b) The difference between two coefficients c) The difference between two R-square values d) None of the above Question 7. A marketing analyst is analyzing the seasonality of the price of advertising. She believes that the advertising price is significantly different in the first quarter relative to the other three quarters. She uses the first quarter as the reference point in the regression by leaving it out. The number of dummy variables that the analyst will need in her regression equation is: a. 2. b. 3. c. 4 Answer Key: 1. (c) 2. (c) 3. (d) 4. (a) 5. 1.415 (Elastic Zone) 6. (a) 7. (b)

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