Consider the following model of the demand for beer by households. q=B1 + B2pb+ B3pl +...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the following model of the demand for beer by households. q=B1 + B2pb+ B3pl + B4x + e Here q= quantity of beer consumed (liters), pb= price of beer, pl-price of liquor, and x = real income of households. The two prices are expressed relative to the price of all other goods. The data file is beer2.dta and is on the course page in Brightspace. a. On theoretical grounds, what would you expect the signs of B2, B3, and B4 to be? (2 points) b. Estimate this model and write out your equation, with coefficient estimates, standard errors, sample size and R². Also write out the sample means of all variables. (4 points) Do the estimated coefficients have the signs you expected? (1 point) c. Test whether the liquor price coefficient is statistically significant. Use the 5% level of significance, and state H₁ according to your theoretical expectations in a. (2 points) d. Using the information you have provided in b., answer the following: (3 points) (i) Is the demand for beer elastic with respect income, and its own price? (ii) Is beer a strong or weak substitute for, or complement to, liquor? Explain. Consider the following model of the demand for beer by households. q=B1 + B2pb+ B3pl + B4x + e Here q= quantity of beer consumed (liters), pb= price of beer, pl-price of liquor, and x = real income of households. The two prices are expressed relative to the price of all other goods. The data file is beer2.dta and is on the course page in Brightspace. a. On theoretical grounds, what would you expect the signs of B2, B3, and B4 to be? (2 points) b. Estimate this model and write out your equation, with coefficient estimates, standard errors, sample size and R². Also write out the sample means of all variables. (4 points) Do the estimated coefficients have the signs you expected? (1 point) c. Test whether the liquor price coefficient is statistically significant. Use the 5% level of significance, and state H₁ according to your theoretical expectations in a. (2 points) d. Using the information you have provided in b., answer the following: (3 points) (i) Is the demand for beer elastic with respect income, and its own price? (ii) Is beer a strong or weak substitute for, or complement to, liquor? Explain.
Expert Answer:
Answer rating: 100% (QA)
On theoretical grounds what would you expect the signs of B2 B3 and B4 to be The sign of B2 would be positive because an increase in the price of beer ... View the full answer
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
Posted Date:
Students also viewed these mathematics questions
-
Consider the following model to explain sleeping behavior: sleep = BQ + Bjotwrk + B2 educ + B1 age + B4 age2 + B5 yngkid + B6 male + u. (i) Write down a model that allows the variance of u to differ...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
You are a statistical trainee actuary working for an insurance company. You are part of a statistical modelling team that is developing models based on independent non identically distributed random...
-
0 3 S 25 cos(x) sin (x) dx -T3
-
Charlene owns a 70% interest in Maupin Mopeds, which is organized as a partnership. She wants to open another business and needs office space for it. She has Maupin distribute a building worth...
-
Refer to the data in exercise 7-7. Eric Parker is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the...
-
The following information from Jefferson Company's operations is available: Required a. Prepare a multiple-step income statement. Disregard earnings per share amounts. b. Prepare a single-step income...
-
Oxy Corp. is negotiating with the Wick Construction Co. for the renovation of the Oxy corporate head quarters. Wick, the owner of the Wick Construction Co., is also one of the five members of the...
-
6 . Find and simplify the first five terms of the expansion of ( 3 x + y ) ^ 1 0
-
Ivey Company prepared the following budgeted income statement for the first quarter of 2016: Ivey Company is considering two options. Option 1 is to increase advertising by $ 1,000 per month. Option...
-
Question 1 Consider the following circuit, consisting of a 4.5 volt DC power supply (which could be achieved by putting three 1.5 V alkaline batteries in series), two resistors, and two diodes as...
-
1 1 2 Reduce the following matrix to normal form and hence find its rank: 2-1 4 [13 2 5 1 -1 3 2 4 3 4 4 1 2 1 22 - 1 6. 3 (ii) 1 2 3 4 3 -1 1 2 1 1 2 3-1 -1 -2 9 1 2 0 1 02 LO 5 2-3 E
-
In marigold company, direct labor is $ 2 0 per hour. the company expects to operate at 9 4 0 0 direct labor hours each month. In january 2 0 2 5 , direct labor totalling 1 9 3 6 4 0 is incurred in...
-
All payments are end-of-period unless otherwise stated. a) The revenue stream of a project is estimated as $250K in the first year, and grows at 5% p.a. over the 15 years of the study period. MARR is...
-
what extent is social reality a product of collective interpretation, and how does this perspective alter the understanding of social institutions ?
-
what ways does the organizational learning process catalyze a paradigm shift within a dynamic ecosystem, fostering adaptive resilience amidst multifaceted environmental turbulence, and how might this...
-
If, in a sample of n = 20 selected from a normal population, X = 60 and S = 20, what are the critical values of t if the level of significance, x, is 0.10, the null hypothesis, Ho, is =50, and the...
-
Find the volume of the described solid S. A frustum of a right circular cone with height h, lower base radius R, and top radius r -r- --R
-
Use the data in APPLE.RAW for this exercise. These are telephone survey data attempting to elicit the demand for a (fictional) "ecologically friendly" apple. Each family was (randomly) presented with...
-
(i) Use the data in HPRICE1.RAW to obtain the heteroskedasticity-robust standard errors for equation (8.17). Discuss any important differences with the usual standard errors. (ii) Repeat part (i) for...
-
In the linear model given in equation (10.8), the explanatory variables xt = (xt1, ...., xtk) are said to be sequentially exogenous (sometimes called weakly exogenous) if E(ut|xt, xt-1,_,, ...,x,) =...
-
Show that the decimal expression for \(\sqrt{2}\) is not periodic.
-
Express the decimal \(1 . \overline{813}\) as a fraction \(\frac{m}{n}\) (where \(m\) and \(n\) are integers).
-
Which of the following numbers are rational, and which are irrational? Express those which are rational in the form \(\frac{m}{n}\) with \(m, n \in \mathbb{Z}\). (a) \(0 . a_{1} a_{2} a_{3} \ldots\),...
Study smarter with the SolutionInn App