The following regression was estimated for 23 quarters between 2004 and 2011 to test the hypothesis that tire sales (T) depend on new automobile sales (A) and total miles driven (M). Standard errors are listed in parentheses.

Here, N = 23, corrected R2 = .83, F = 408, standard error of the regression = 1.2, and Durbin-Watson statistic = 1.92.
a. Does the regression equation (and its estimated coefficients) make economic sense? Explain.
b. Based on the regression output, discuss the statistical validity of the equation.
c. Do the coefficients on “miles driven” and “new-auto sales” significantly differ from 1.0? Explain why we might use unity as a benchmark for these coefficients.

Transcribed Image Text:

%AT .45 + 1.411%ΔΜ) + 1.12(%ΔΑ) (.32)(.19) (.41)