Economics - Demand Equation Problem

Considering the following print out of regression analysis using MS-Excel, to estimate the demand for chicken equation, where Q is the quantity demanded, P is the price, I is consumer income, and Po is the price of some other good, answer the following questions:

1.      Write the estimated demand equation.

2.      Check the signs of the independent variables,  show if any of them is not acceptable on theoretical bases.

3.      Explain the meaning of R² value.

4.      What do you understand from “Significance F”, if the acceptable  significance level is 5%.

5.      What do you understand from “P-Values”, if the acceptable significance level is 5%.

 

1.      Q = 65.22 – 0.12P + 0.89I + 4.20P_o

2.      All coefficients have the expected signs, assuming that the other good is a substitute, and the good is a normal one.

3.      R² value means that 67% of the variations in Q are explained by the variations in P, I, and P_o, while 33% of the variations in Q are due to other variables not included in the model.

4.      Although R square is 67%, but the probability of error in the estimates is 6.8% which exceeds the acceptable level, so the researcher should not reject the null hypothesis that the three independent variables have no effect on Q, or do not explain the variations in Q.

5.      Both P and I have significant effect on Q, while P_o has no significant effect on Q. Or you may say: for both P and I the null hypothesis should be rejected, while for Po the null hypothesis should not be rejected.