Question

In: Economics

Linear Regression Regression Statistics R 0.99798 R Square 0.99597 Adjusted R Square 0.99445 Standard Error 1.34247...

Linear Regression

Regression Statistics

0.99798

R Square

0.99597

Adjusted R Square

0.99445

Standard Error

1.34247

Total Number Of Cases

Hamb Consump = 176.2709 - 106.6901 * Hamb Price + 4.5651 * Income (1,000s) - 12.1556 * Hot Dog Price

ANOVA

d.f.

p-level

Regression

3,560.58212

1,186.86071

658.549258

Residual

14.41788

1.80224

Total

11.

3,575.

Coefficients

Standard Error

LCL

UCL

t Stat

p-level

H0 (5%) rejected?

Intercept

176.27093

45.28994

71.83215

280.709717

3.89206

0.0046

Yes

Hamb Price

-106.69008

15.52317

-142.48657

-70.89359

-6.87296

0.00013

Yes

Income (1,000s)

4.5651

1.80603

0.40039

8.72981

2.5277

0.03538

Yes

Hot Dog Price

-12.15559

20.97373

-60.5211

36.20991

-0.57956

0.57816

T (5%)

2.306

LCL - Lower value of a reliable interval (LCL)

UCL - Upper value of a reliable interval (UCL)

Residuals

Observation

Predicted Y

Residual

Standard Residuals

49.13695

0.86305

0.75384

78.22258

1.77742

1.55251

93.75923

1.24077

1.08377

104.87439

0.12561

0.10971

70.45426

-0.45426

-0.39678

84.62138

0.37862

0.33072

56.28714

-1.28714

-1.12427

61.62165

-1.62165

-1.41645

75.33225

-0.33225

-0.29021

90.8689

-0.8689

-0.75895

101.22231

-1.22231

-1.06765

63.59896

1.40104

1.22376

QUESTIONS 1 - 5.

This problem is worth 25 points.

Use the following values to complete the problems below:

Hamburger demand

77.5

Hamb Price (hamburger price)

1.35

Income (1000's)

14.06

64486.5235

Hot Dog Price

4. Calculate the cross price of elasticity of hamburger with respect to the price of hot dogs and if the price of hamburgers increased by 10% how much would the demand for hamburgers change? (show calculation)

1.57

Solutions

Expert Solution

From given regression equation,

Hamburger demand = 176.2709 - 106.6901 x Hamburger Price + 4.5651 x Income - 12.1556 x Hot Dog Price

Plugging in given values,

77.5 = 176.2709 - (106.6901 x 1.35) + (4.5651 x 14.06) - (12.1556 x Hot dog price)

77.5 = 176.2709 - 144.03 + 64.19 - (12.1556 x Hot dog price)

77.5 = 96.4262 - (12.1556 x Hot dog price)

(12.1556 x Hot dog price) = 18.9262

Hot dog price = 1.557

(1) Cross price elasticity of demand = (dHambConsup / dHotDogPrice) x (Hot Dog Price / Hamburger demand)

= - 12.1556 x (1.557 / 77.5)

= - 0.2442

(2) Own price elasticity of demand = (dHambConsup / dHambPrice) x (HambPrice / Hamburger demand)

= - 106.6901 x (1.35 / 77.5)

= - 1.8505

It means that as price of hamburger increases by 1%, quantity demanded of hamburger will decrease by 1.8505%.

As price of hamburger increase by 10%, quantity demanded of hamburger will decrease by (10 x 1.8505)% = 18.505%.

Rahul Sunny answered 1 year ago

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