We have seen that gas prices can fluctuate. But during some periods they have moved consistently. Here are the data extracted for one week of each month from January 2002 to May 2007.

The bend in the plot and the increasing variation suggest a multiplicative model. Here is a multiplicative model with seasonal dummy variables for months.

a) Interpret the slope.
b) Interpret the intercept.
c) In what month of the year are gas prices highest?

Transcribed Image Text:

250 200 죤 50t "wyn 2002 2003 2004 2005 2006 2007 Year Dependent variable s: Log price R squared = 92.0% R squared (adjusted>= 90.2% s# 0.0377 with 66-13# 53 degrees of freedom ariable Intercept Year since 2002 0.071754 0.0030 Feb Mar Apr Coeff SE(Coeff) t-ratio P-value 0.0001 24 .2 <0.0001 2 04566 0.0164 125 0.002682 0.0210 0.030088 0.0210 0.053455 0.0210 0.058316 0.0210 0.044912 0.0221 0.055008 0.0221 0.061186 0.0221 0.057329 0.0221 0.039903 0.0221 0.012609 0.0221 0.129 0.898 Jun Jul Aug Sep Oct Now Dec 1.43 0.1574 2.55 0.0139 2.78 0.0075 2.03 0.0471 2.49 0.0159 2.77 0.0077 2.60 0.0122 1.8 0.0764 0.571 0.5704 -0.386 0.7011 -0.095243 0.0221