2. Suppose that QED, Inc. estimates weekly demand for good X, Qx, and obtains the parameter estimates below from a multiple regression using the double-log model: Px Py Pz I Intercept 3.402 Coefficients -2.2 1.8 -0.55 -0.8 t-statistics 4.12 2.73 2.09 -7.54 where Px = price of good X, Py = price of good Y, Pz = price of good Z, and I = monthly per capita personal income. Also, multiple R² = 0.86, n = 20, and F-statistic = 17.08. a) Using the above results, construct (write out) the estimated regression equation (i) in the double log form, and, (ii) in the power or multiplicative function form. b) Interpret and explain the coefficients of Py, P₂, and I. c) Assuming a 5% significance level (k = 0.05), determine the degrees of freedom and the critical t-value. Perform t-tests on the parameter estimates for Py and P₂. Clearly and explicitly state the hypotheses for each parameter that you are testing. d) Assuming a 5% significance level (k = 0.05), perform an F-test on the entire regression. Clearly and explicitly state the hypothesis that you are testing. e) Explain the meaning of the multiple R². Briefly discuss the robustness of the estimated model, i.e., how "good" is it?

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2. Suppose that QED, Inc. estimates weekly demand for good X, Qx, and obtains the parameter
estimates below from a multiple regression using the double-log model:
Px
Py
Pz
Intercept
3.402
Coefficients
-2.2
1.8
- 0.55
-0.8
t-statistics
4.12
2.73
2.09
- 7.54
where Px = price of good X, Py = price of good Y, P₂ = price of good Z, and I = monthly per capita
personal income. Also, multiple R² = 0.86, n = 20, and F-statistic = 17.08.
a) Using the above results, construct (write out) the estimated regression equation (i) in the
double log form, and, (ii) in the power or multiplicative function form.
b) Interpret and explain the coefficients of Py, P₂, and I.
c)
Assuming a 5% significance level (k = 0.05), determine the degrees of freedom and the
critical t-value. Perform t-tests on the parameter estimates for Py and P₂. Clearly and
explicitly state the hypotheses for each parameter that you are testing.
d) Assuming a 5% significance level (k = 0.05), perform an F-test on the entire regression.
Clearly and explicitly state the hypothesis that you are testing.
e) Explain the meaning of the multiple R². Briefly discuss the robustness of the estimated model,
i.e., how "good" is it?
Transcribed Image Text:2. Suppose that QED, Inc. estimates weekly demand for good X, Qx, and obtains the parameter estimates below from a multiple regression using the double-log model: Px Py Pz Intercept 3.402 Coefficients -2.2 1.8 - 0.55 -0.8 t-statistics 4.12 2.73 2.09 - 7.54 where Px = price of good X, Py = price of good Y, P₂ = price of good Z, and I = monthly per capita personal income. Also, multiple R² = 0.86, n = 20, and F-statistic = 17.08. a) Using the above results, construct (write out) the estimated regression equation (i) in the double log form, and, (ii) in the power or multiplicative function form. b) Interpret and explain the coefficients of Py, P₂, and I. c) Assuming a 5% significance level (k = 0.05), determine the degrees of freedom and the critical t-value. Perform t-tests on the parameter estimates for Py and P₂. Clearly and explicitly state the hypotheses for each parameter that you are testing. d) Assuming a 5% significance level (k = 0.05), perform an F-test on the entire regression. Clearly and explicitly state the hypothesis that you are testing. e) Explain the meaning of the multiple R². Briefly discuss the robustness of the estimated model, i.e., how "good" is it?
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