Model specification

# Model specification - Assignment 01 Course Title...

This preview shows pages 1–6. Sign up to view the full content.

Assignment – 01 Course Title: Introduction to Econometrics Course Code: MHE 604 Mousumi Farhana Roll: 16, Session: 2008-2009 Masters of Health Economics Institute of Health Economics University of Dhaka Submitted To: Prof. Dr. Shamsuddin Ahmad Director Institute of Health Economics University of Dhaka

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Contents

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Model specification Demand for a commodity depends on its price along with the price of substitute goods. Beside these, demand for a commodity also depends on taste, substitutability of other goods. Therefore, the mathematical model for the demand for chicken is as follows, D c = f (income, own prices, substitute prices) Here C cd = per capita consumption of chicken, lbs D income = real disposal income per-capita in \$ C price = real retail price of chicken per cents/lb B price = real retail price of beef cents/lb P price = real retail price of pork cents/lb Chick sub = composite real price of chicken substitutes cents/lb Model 1 = + + + + CCD α β1 DIncome β2CPrice β3Time ε …………… 1 Table 1: Correlation among the variables | conchickdisinc~echickpr year -------------+------------------------------------ conchick | 1.0000 disincome | 0.9473 1.0000 chickpr | 0.8397 0.9359 1.0000 year | 0.9783 0.9400 0.8825 1.0000
It is evident from the correlation matrix that consumption of chicken is highly correlated with disposal income, chicken price and time. Table 2: Regression result for model 1 Source | SS df MS Number of obs = 23 -------------+------------------------------ F( 3, 19) = 365.70 Model | 1175.57001 3 391.856669 Prob> F = 0.0000 Residual | 20.3587291 19 1.07151206 R-squared = 0.9830 -------------+------------------------------ Adj R-squared = 0.9803 Total | 1195.92874 22 54.3603971 Root MSE = 1.0351 ------------------------------------------------------------------------------ conchick | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- disincome | .0071118 .0013895 5.12 0.000 .0042036 .01002 chickpr | -.2624647 .0564277 -4.65 0.000 -.3805694 -.1443601 year | .8296858 .0954294 8.69 0.000 .6299497 1.029422 _cons | -1608.683 189.1441 -8.51 0.000 -2004.566 -1212.8 ------------------------------------------------------------------------------ All the variables are significant at 1% level. From above table (Table 2) it is evident that the F – statistics shows the model is perfectly significant, and R-square is .9830, i.e variation of consumption of chicken is 98% explained by the model. Now, the coefficient of disposal income is statistically significant and the magnitude is also as expected that is one dollar increase in disposal income will cause a .007 dollar increase in consumption expenditure on chicken, given other things constant. Like, disposal income, price of

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 05/25/2011 for the course HEALTH ECO 403 taught by Professor Shamsuddin during the Fall '11 term at University of Dhaka.

### Page1 / 9

Model specification - Assignment 01 Course Title...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online