Question
In: Economics
Using the following regression results Dependent Variable: Q for the monopolistically competitive chemical company Intercept &nbs
Using the following regression results
Dependent Variable: Q for the monopolistically competitive chemical company
Intercept -3.415
(0.2660)
Price 0.118
(0.029)
Price Related Chemicals 0.028
(0.003)
Local Dummy 0.039
(0.033)
R^2 0.8022
ADJ. R^2 0.7905
OBS 58
Note standard errors for each variable is in parenthesis below the corresponding variable.
a. discuss the statistical significance of the parameters and the equation as a whole.
b. what is the estimated value of the parameter?
c. what would be different if this estimated equation was instead a production, cost or supply estimation?
Solutions
Expert Solution
The regression equation is:
Q=-3.415 + 0.118*Price + 0.028*Price_Related_Chemicals + 0.039*Local_Dummy
The actual t-statistic = Parameter estimates/Standard Error
(a)
| Parameter estimates | Standard Error | actual t-statistic | absolute value of actual t-statistic | At 5% level of significance, critical t-statistic at n-3 , 55 degree of freedom | |
| Intercept | -3.415 | 0.266 | -12.83834586 | 12.83834586 | 2.00 |
| Price | 0.118 | 0.029 | 4.068965517 | 4.068965517 | 2.00 |
| Price Related Chemicals | 0.028 | 0.003 | 9.333333333 | 9.333333333 | 2.00 |
| Local Dummy | 0.039 | 0.033 | 1.181818182 | 1.181818182 | 2.00 |
Thus, it can be observed that Intercept, Price and Price Related Chemicals are statistically significant variables at 5% level of significance.
(b) The estimated value of parameters are the parameter estimates of Intercept, Price, Price Related Chemicals and Local Dummy.
Thus, the result is:
| Parameter estimates | |
| Intercept | -3.415 |
| Price | 0.118 |
| Price Related Chemicals | 0.028 |
| Local Dummy | 0.039 |
(c)
If the estimated equation would have been production or cost or supply estimation, the structural form of the model would have been different.
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