1University of California, Davis Managerial Economic(ARE) 106, Summer 2009 Instructor: John H. Constantine KEY—Problem Set #2: Due MONDAY, August 17, 2009Problem 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. Obsxy151023153158491251466418732286149811(a) Plot the data. (b) The PRF for this model is: yi= β1+ β2xi+ ei. Use the method of least-squares to estimate (by hand) the sample regression function. You must provide numeric estimates for the following variables: (i) β1(ii) β2(iii) σ2(iv) var(β2) (v) s.e.(β2) (c) State the SRF for the given sample above. Plug in the parameter estimates from part (b) into this equation. y∧= 19.61 – 0.90x.
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