Question

a) The results of a logarithmic regression of demand for food on price and personal

disposable income is given as:

= 2.34 − 0.31 log + 0.45 log + 0.65 log−1

Se = (0.05) (0.20) (0.14)

n = 50 R2 = 0.90 d = 1.8

where Q = food consumption per capita

P = food price

Y = real per capita disposable income

i. Just by looking at the estimated regression, do you suspect serial

correlation in it?

ii. Which test do you use to confirm your suspicion and why?

iii. Outline the steps of the above mentioned test and provide a conclusion

on the basis of your calculations.

(b) Suppose you are given the following regression:

= 0 + 1 + 2

2 +

Do you think the model suffers from multicollinearity? If yes then what are

the possible remedies of the problem?

c) State and prove the minimum variance property of the slope coefficient in a two ​

Answer 1

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