ARE106SU09HW4KEY

ARE106SU09HW4KEY - University of California, Davis...

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Unformatted text preview: University of California, Davis Managerial Economic(ARE) 106, Summer 2009 Instructor: John H. Constantine KEY Problem Set #4: Due Thursday, August 27, 2009 Problem 1 : This problem requires the use of SHAZAM. Suppose you wish to estimate an Engel Curve for beef, that is, you wish to see how the consumption of beef responds to a change in income. read(are106/chick6.txt) Y PC PB INC set nowide sample 1 44 *PB = price of beef, cents per pound, in year t *PC = price of chicken, cents per pound, in year t *Y = per capita consumption of beef consumed, in pounds, in year t *INC = disposable income, in $100, in year t STAT Y INC GENR LNY = LOG(Y) GENR LNINC =LOG(INC) OLS Y INC OLS LNY LNINC stop (a) Given the above SHAZAM command file, state the two PRFs to be estimated. Y t = 1 + 2 INC t + e t . ln(Y t ) = 1 + 2 ln(INC t ) + e t . (b) For each model, test the hypothesis that 2 = 0. You are to test using the (i) t-test, (ii) confidence interval approach, and (iii) p-statistic. For both models, in all three tests, we reject H : 2 = 0. The results follow this answer, and the answer to this question should be obvious. (c) For the linear model, test the hypothesis that 2 = 0.30 versus is it not. You are to test using the (i) t-test, (ii) confidence interval approach, and (iii) p-statistic. For the LIN-LIN model, in all three tests, we cannot reject H : 2 = 0.30. The results follow this answer, and the answer to this question should be obvious. (d) For the double-log model, test the hypothesis that 2 = 0.5 versus is it not. You are to test using the (i) t-test, (ii) confidence interval approach, and (iii) p-statistic. For the LOG-LOG model, in all three tests, we cannot reject H : 2 = 0.5. The results follow this answer, and the answer to this question should be obvious. (e) Suppose we are at the mean values of the data. What are the income demand elasticities in each model? Elasticities when evaluated at the mean of the data: LIN-LIN : b 2 (PC/Y) = -0.5223 LOG-LOG : b 2 = -0.4347 (f) Suppose INC = 55. What are the (i) predicted value of Y ( Y ) and (ii) income demand elasticities in each model? When INC = 55 : (i) Y : L i n e a r : Y = 16.091 + 0.33319(55) = Y = 34.42 Log-log : ) Y ln( = 1.2427 + 0.58927*ln(55) = 3.60 Y = 36.75 (ii) Income Elasticity : L i n e a r : 0.6483 Log-log : 0.3332 SHAZAM OUTPUT for Problem 1 -----------------------------171502235417200 Content-Disposition: form-data; name="IX"; filename="hw4_prob01.txt" FILE UPLOAD (120 CHARS MAX) FOR: Content-Type: text/plain ********************************************************************* Hello/Bonjour/Aloha/Howdy/G Day/Kia Ora/Konnichiwa/Buenos Dias/Nee Hau/Ciao Welcome to SHAZAM - Version 10.0 - JUL 2004 SYSTEM=LINUX PAR= 781 |_read(are106/chick6.txt) Y PC PB INC UNIT 88 IS NOW ASSIGNED TO: are106/chick6.txt ...SAMPLE RANGE IS NOW SET TO: 1 44 |_set nowide |_sample 1 44 |_*PB = price of beef, cents per pound, in year t |_*PC = price of chicken, cents per pound, in year t...
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This note was uploaded on 11/19/2009 for the course ARE ARE106 taught by Professor Constantine during the Spring '09 term at UC Davis.

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ARE106SU09HW4KEY - University of California, Davis...

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