Consider the following model that relates the percentage of a household's budget spent on alcohol WALC to total expenditure TOTEXP, age of the household head \(A G E\), and the number of children in the household \(N K\).

This model was estimated using 1200 observations from London. An incomplete version of this output is provided in Table 5.6.

a. Fill in the following blank spaces that appear in this table.
i. The \(t\)-statistic for \(b_{1}\).
ii. The standard error for \(b_{2}\).
iii. The estimate \(b_{3}\).
iv. \(R^{2}\).
v. \(\hat{\sigma}\).

b. Interpret each of the estimates \(b_{2}, b_{3}\), and \(b_{4}\).

c. Compute a \(95 \%\) interval estimate for \(\beta_{4}\). What does this interval tell you?

d. Are each of the coefficient estimates significant at a 5\% level? Why?

e. Test the hypothesis that the addition of an extra child decreases the mean budget share of alcohol by 2 percentage points against the alternative that the decrease is not equal to 2 percentage points. Use a \(5 \%\) significance level.

Transcribed Image Text:

WALC B+B In(TOTEXP) + 3NK + B4AGE+e =