Please interpret the coefficients of the following estimated regressions: (a) rdintens ̂ = 2:625 + 0:000053sales....

Please interpret the coefficients of the following estimated regressions:

(a) rdintens ̂ = 2:625 + 0:000053sales. Note that rdintens represents the R&D expenditures as a percentage of sales, while sales is the annual sales volume of the firm expressed in millions of dollars.

(b) ln̂(Q)= 3.717 – 1.21ln(P), where Q is the per capita consumption of chicken in pounds and P is the price of chicken in dollars.

Expert Solution

Note: assuming that in part (a), the decimals are mistaken as colons.

Answer: (a) Here the y-intercept = 2.625 and slope = 0..000053.

where rdintens represents the R&D expenditures as a percentage of sales, while sales is the annual sales volume of the firm expressed in millions of dollars.

Thus y-intercept is interpreted as when the annual sales volume of the firm is zero, then the R&D expenditures is 2.625%.

Also, the slope is interpreted as, for every million dollar increase in the annual sales, there is a 0.000053 % increase in the R&D expenditures.

(b) This is a log-log model.

The y-intercept here is = 3.717 which is the expected value of the response variable, when the predictor is set to 1.

Here it is interpreted as-- when the price of chicken is 1 dollar, then the logarithm of per capita consumption of chicken is 3.717 pounds.

The slope = -1.21 which is interpreted as, if we increase the price of chicken by 1 dollar, the consumption of chicken will decrease by 1.21 pounds.

Slope measures the expected change in the response when the predictor changes by a fixed percentage.

orchestra answered 1 year ago

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