1. For each of the following pairs, explain why you believe that they are positively related, negatively related, or essentially unrelated. If they are related, identify the dependent variable. a. The cost of constructing a house and its market price. b. The winter price of corn and the number of acres of corn planted by Iowa fanners the following spring. c. The price of steak and the amount purchased by a college dining hall. d. The price of gasoline and sales of large cars. e. The number of wins by the New York Yankees and the price of tea in China. Consumption function Personal Consumption Expaidaurcs, billions of dollars 95 percent prediction interval.

Consumption function 95 percent prediction interval.

2. Given Figure is a scatter diagram of the annual rates of return on Apple and Microsoft stock during the years 1998-2008:

a. What was the highest annual return for Apple? b. What was the lowest annual return for Microsoft? c. Was the average annual return higher for Apple or for Microsoft? d. Was there a greater dispersion in Apple or Microsoft returns? e. Were Apple and Microsoft stock returns positively related, negatively related, or unrelated? 3. Use the data in Table 1.2 to calculate least squares estimates of the relationship between income and spending. What is the estimated slope? 4. Use the data in Table 1.6 to estimate a simple linear regression model where the dependent variable is 2003 prices and the explanatory variable is the hard drive size. 5. Use the data in Table 1.6 to estimate a simple linear regression model where the dependent variable is 2007 prices and the explanatory variable is the hard drive size. 6. Use the data in Table 1.6 to estimate a simple linear regression model where: a. The dependent variable is the price of an 80?GB hard drive and the explanatory variable Is the year.

b. The dependent variable is the natural logarithm of the price of an 80-GB hard drive and the explanatory variable is the year. Which of these equations seems to describe the data better? Explain your reasoning.

7. A least squares regression was used to estimate the relationship between the dollar price P of 45 used 2001 Audi A4 2.8L sedans with manual transmission and the number of miles M the car had been driven:

P? = 16.958 - 0.0677M. R2 = 0.70 (2.553) (0.0233)

ESSENTIAL STATISTICS. REGRESSION, AND ECONOMETRICS Table 8.2 Exercise 8.8 The standard errors are in parentheses. a. Does the value 16,958 seem reasonable? b. Does the value -0.0677 seem reasonable? c. Does the value 0.70 seem reasonable? d. Is the estimated relationship between M and P statistically significant at the 5 percent level? e. Should the variables be reversed, with Mon the left-hand side and P on the right-hand side? Why or why not?

Transcribed Image Text:

Personal Consumption Expenditures, billions of dollars 90-1 80- 70- 60 50- sample mean sample mean 30 m 40 45 50 55 60 65 70 75 80 85 90 Disposable Personal Income, billions of dollars -7.12+0.84x Personal Consumption Expenditures, billions of dollars 90- 80- 70- 60- 50- 40 sample mean 30+ 40 45 50 55 60 65 sample mean ŷ=7.12+0.84x 60 65 70 75 80 85 90 dollars Disposable Personal Income, billions of Apple 250 200 150 100 -50 -100 -100 -50 0 100 150 50 Microsoft 200 250 1960 104.34 1970 118.47 1961 109.42 1971 171.02 1962 121.90 1972 196.38 1963 133.59 1973 170.43 1964 127.41 1974 111.48 1984 1965 122.74 1975 96.70 1985 1966 128.11 1986 165.59 1987 168.36 145.42 97.08 1967 107.63 1968 125.62 1969 122.23 1976 1977 1978 1979 1980 1981 1982 1983 1988 1989 107.68 90.34 88.52 141.92 145.78 145.14 150.45 135.05 124.00 114.68 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 98.38 2000 84.50 2001 98.97 107.31 121.42 112.85 2004 2005 123.08 2006 122.83 2007 2008 2009 2002 2003 134.75 136.77 130.72 133.58 142.08 153.98 162.97 172.34 150.08 112.92 75.42 46.17 Personal Consumption Expenditures, billions of dollars 90-1 80- 70- 60 50- sample mean sample mean 30 m 40 45 50 55 60 65 70 75 80 85 90 Disposable Personal Income, billions of dollars -7.12+0.84x Personal Consumption Expenditures, billions of dollars 90- 80- 70- 60- 50- 40 sample mean 30+ 40 45 50 55 60 65 sample mean ŷ=7.12+0.84x 60 65 70 75 80 85 90 dollars Disposable Personal Income, billions of Apple 250 200 150 100 -50 -100 -100 -50 0 100 150 50 Microsoft 200 250 1960 104.34 1970 118.47 1961 109.42 1971 171.02 1962 121.90 1972 196.38 1963 133.59 1973 170.43 1964 127.41 1974 111.48 1984 1965 122.74 1975 96.70 1985 1966 128.11 1986 165.59 1987 168.36 145.42 97.08 1967 107.63 1968 125.62 1969 122.23 1976 1977 1978 1979 1980 1981 1982 1983 1988 1989 107.68 90.34 88.52 141.92 145.78 145.14 150.45 135.05 124.00 114.68 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 98.38 2000 84.50 2001 98.97 107.31 121.42 112.85 2004 2005 123.08 2006 122.83 2007 2008 2009 2002 2003 134.75 136.77 130.72 133.58 142.08 153.98 162.97 172.34 150.08 112.92 75.42 46.17

Answer rating: 100% (QA)

1 a They are confidently related This according to the law of demand and supply the cost of constructing the house will have an effect in the market b ... View the full answer