Model specification - Assignment 01 Course Title...

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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
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Contents
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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
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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
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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.

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Model specification - Assignment 01 Course Title...

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