ECON0701_Midterm_1_2009_Sem_1

# ECON0701_Midterm_1_2009_Sem_1 -  = -0.7885 The price of...

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ECON0701 Midterm 1 2009 Sem 1 Question 1 a) False. Sample fitted line: i i x y 1 0 Or Sample regression model: i i i x y 1 0 b) True. i is the OLS residuals with respect to the sample fitted line. 0 1 n i i i x is guaranteed by the second normal equation.

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c) False. i is the error with respect to the population line. ) ( 1 0 i i i x y In general, 0 1 n i i i x although 0 ) ( i i x E However, n x n i i i 1 will converge to 0 ) ( i i x E when n is very large.
Question 2 a) n i i i n i i x y S 1 2 1 2 ) ( ) ( b) ) ( S Min F.O.C.: 0 ) ( 2 1 i n i i i x y x S 0 1 2 n i i i i x y x n i i n i i i x y x 1 2 1

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Question 3 a) Holding other factors constant, when increasing the median income by 1 unit, on average the price of soda increases by 2 \$ . b) ) 1 ( 2 k n SSR ) 1 2 ( 401 ) 0861 . 0 ( 2 SSR SSR=2.950458
c) ) ( ) ( 2 1 income prpblck psoda ) 50 ( 016 . 0 ) 1 . 0 ( 115 . 0

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Unformatted text preview:  = -0.7885 The price of soda is expected to decrease by \$0.7885. d) Holding other factors constant, when increasing the proportion of population that is black (prpblck) by 0.01 (i.e. 1 percentage points), on average the price of soda change by % % ) 100 ( 01 . 1 1   . e) The dependent variables are different in the two equations (2) and (4). Therefore, the SST’s are not the same [Note that 2 1 ) ( y y SST n i i     ] We cannot compare the 2 R of the 2 different regressions just by looking at the number of explanatory variables included, yet without actually estimating (4)....
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## This note was uploaded on 09/06/2010 for the course FBE ECON0701 taught by Professor Paul during the Spring '09 term at HKU.

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ECON0701_Midterm_1_2009_Sem_1 -  = -0.7885 The price of...

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