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ARE106SU09HW2KEY - 1 University of California Davis...

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1 University of California, Davis Managerial Economic(ARE) 106, Summer 2009 Instructor: John H. Constantine KEY —Problem Set #2: Due MONDAY, August 17, 2009 Problem 1 (A table is provided at the end of the assignment to calculate the numbers) : The following data give the daily price (x, ($/unit)) and consumption (y) of some commodity Z; the data were collected at nine shops in Davis that sell Z for a one week period. The objective is to estimate the demand for Z. Obs x y 1 5 10 2 3 15 3 15 8 4 9 12 5 14 6 6 4 18 7 3 22 8 6 14 9 8 11 (a) Plot the data. (b) The PRF for this model is: y i = β 1 + β 2 x i + e i . Use the method of least-squares to estimate (by hand) the sample regression function. You must provide numeric estimates for the following variables: (i) β 1 (ii) β 2 (iii) σ 2 (iv) var( β 2 ) (v) s.e.( β 2 ) (c) State the SRF for the given sample above. Plug in the parameter estimates from part (b) into this equation . y = 19.61 – 0.90 x .
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