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?

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.

Rahul Sunny answered 9 months ago

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