# chap02 - CHAPTER 2 Exercise Answers EXERCISE 2.3(a The line...

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3 CHAPTER 2 Exercise Answers EXERCISE 2.3 (a) The line drawn for part (a) will depend on each student’s subjective choice about the position of the line. For this reason, it has been omitted. (b) 2 1.514286 b  1 10.8 b (c) 5.5 y 3.5 x ˆ 5.5 y 2 4 6 8 10 1 2 3 4 5 6 x y Fitted values Figure xr2.3 Observations and fitted line

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Chapter 2, Exercise Answers Principles of Econometrics, 4e 4 Exercise 2.3 (Continued) (d) ˆ i e 0.714286 0.228571 1.257143 0.257143 1.228571 1.285714 ˆ 0. i e (e) ˆ 0 ii xe EXERCISE 2.6 (a) The intercept estimate 1 240 b  is an estimate of the number of sodas sold when the temperature is 0 degrees Fahrenheit. Clearly, it is impossible to sell 240 sodas and so this estimate should not be accepted as a sensible one. The slope estimate 2 8 b is an estimate of the increase in sodas sold when temperature increases by 1 Fahrenheit degree. One would expect the number of sodas sold to increase as temperature increases. (b) ˆ 240 8 80 400 y   (c) She predicts no sodas will be sold below 30 F. (d) A graph of the estimated regression line: -200 0 200 400 600 y 0 20 40 60 80 100 x Figure xr2.6 Regression line
Chapter 2, Exercise Answers Principles of Econometrics, 4e 5 EXERCISE 2.9 (a) The repair period comprises those months between the two vertical lines. The graphical evidence suggests that the damaged motel had the higher occupancy rate before and after the repair period. During the repair period, the damaged motel and the competitors had similar occupancy rates. (b) A plot of MOTEL_PCT against COMP_PCT yields: There appears to be a positive relationship the two variables. Such a relationship may exist as both the damaged motel and the competitor(s) face the same demand for motel rooms. 30 40 50 60 70 80 90 100 0 2 4 6 8 10 12 14 16 18 20 22 24 26 month, 1=march 2003,. ., 25=march 2005 percentage motel occupancy percentage competitors occupancy Figure xr2.9a Occupancy Rates 40 50 60 70 80 90 100 40 50 60 70 80 percentage competitors occupancy percentage motel occupancy Figure xr2.9b Observations on occupancy

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Chapter 2, Exercise Answers Principles of Econometrics, 4e 6 Exercise 2.9 (continued) (c) _ 21.40 0.8646 _ MOTEL PCT COMP PCT  . The competitors’ occupancy rates are positively related to motel occupancy rates, as expected. The regression indicates that for a one percentage point increase in competitor occupancy rate, the damaged motel’s occupancy rate is expected to increase by 0.8646 percentage points.
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chap02 - CHAPTER 2 Exercise Answers EXERCISE 2.3(a The line...

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