To help settle the scientific debate in Problem 7, an expert has provided annual data on the
Question:
a. Using the 10 years of data, estimate the equation, W = a + bt, where W is the water table and t is time in years. Comment on the statistical validity of your equation. Can you conclude that the water table level is dropping over time?
b. Did the region have greater yearly rainfall in the first five years or the last five years of the decade? Should rainfall be added as an explanatory variable in your regression equation? If it were, what would be the effect on the estimate of coefficient b? Explain.
c. Now estimate the equation, W = a + bt + cR, where R denotes annual rainfall. Answer the questions posed in part (a) above. Is this equation scientifically superior to the equation in part (a)?
Step by Step Answer:
Managerial Economics
ISBN: 978-1118808948
8th edition
Authors: William F. Samuelson, Stephen G. Marks