Suppose the economist in question 26 is interested in estimating the price and income elasticity of demand for movie tickets. He can do this by taking the natural logarithms of QT, PT, and GNP and reestimating the multiple regression.

Using the data from question 27, estimate the price and income elasticity for movie tickets and interpret your results.

Question 27

Suppose the economist of question 26 collects the following data.

(a) Estimate the demand for movie tickets.

(b) Do the coefficients carry the correct signs?

(c) If you were going to use a t-test to test the significance of b₁ and b₂, should you use a one-tailed or a two-tailed test?

(d) Use a t-test to test the significance of b₁ and b₂.

Question 26

An economist at the National Academy of Movie Theater Owners wants to estimate the demand for movie tickets. He chooses to estimate the equation.

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Year 1986 1987 1988 1989 1990 1991 QT 1,000 1,100 1,200 1,300 1,400 1,500 PT $7.00 7.25 6.75 6.50 6.50 6.25 GNP 1,000 1,250 1,175 1,800 2,000 2,250