Question

In: Economics

-What would an R2= 0.76 indicate? in reference to a regressional model -Airline pilots are in...

-What would an R2= 0.76 indicate? in reference to a regressional model

-Airline pilots are in big demand. What will cause quantity demanded to decline or increaser?

-What is the difference between a change in the quantity supplied and a shift in the supply curve?

-Explain how a dummy variable can improve the accuracy of a forecast model.

Solutions

Expert Solution

An R squared of 0.76 means that 76% of the variation in the dependent variable is explained by the independent variables in the model. 76% of the variation is explained by the linear regression of the dependents on the independents.

A change in the salary requirements of airline pilots will cause the quantity demanded to increase or decrease. The salary of airline pilots is the price of the good in this case and so a change in the salary of airline pilots will cause changes in the quantity demanded.

A change in the quantity supplied is caused by endogenous variables alone like price changes and will cause a movement along the supply curve. Any shifts in the supply curve will be causes by exogenous factors such as raw material prices etc.

A dummy variable is a binary variable in that it can either take a value of 1 or 0. It helps in a forecast in that it helps to consider several variables that are "yes" or "no" in nature. This helps in incorporating additional information. And so dummy variables add value.


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