1.The following table contains observations on the quantity demanded (y) of a certain commodity, its price (X1) and consumers’ income (X2). Based on the table information answer the following questions.
Quantity demand Price Income
100 5 1100
75 7 800
80 6 900
70 6 500
50 10 300
65 8 400
90 5 1000
100 4 1100
110 3 1300
60 9 400
A.Estimate the parameters and interpret the result
B.Compute the coefficient of multiple determination and interpret the result
C.Estimate the variances and standard errors of the regression parameters
D.Conduct tests of significance at 5% level
E.Construct the 95% confidence intervals for the population parameters.
F.Test of the overall significance of the regression model
Answers
Explanation:
Both the demand and supply curve show the relationship between price and the number of units demanded or supplied. Price elasticity is the ratio between the percentage change in the quantity demanded (Qd) or supplied (Qs) and the corresponding percent change in price. The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price. The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.
Elasticities can be usefully divided into three broad categories: elastic, inelastic, and unitary. An elastic demand or elastic supply is one in which the elasticity is greater than one, indicating a high responsiveness to changes in price. Elasticities that are less than one indicate low responsiveness to price changes and correspond to inelastic demand or inelastic supply. Unitary elasticities indicate proportional responsiveness of either demand or supply, as summarized in Table 1.
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Inelastic
Table 1. Elastic, Inelastic, and Unitary: Three Cases of Elasticity
Before we get into the nitty gritty of elasticity, enjoy this article on elasticity and ticket prices at the Super Bowl.