Question #314788

3. The following data refers to the price of a good ‘P’ and the quantity of the good supplied, ‘S’.

P 2 7 5 1 4 8 2 8

S 15 41 32 9 28 43 17 40

a. Estimate the linear regression line

b. Estimate the standard errors of

c. Test the hypothesis that price influences supply

d. Obtain a 95% confidence interval for


1
Expert's answer
2022-03-21T13:48:28-0400

The linear regression line is S=α+βP+ES=\alpha+\beta P+E

E is random error

and E(s)=α+βPE(s)=\alpha+\beta P

SSS=S2=i=18(SiS)2=1205S_{SS}=\sum S^2=\displaystyle\sum_{i=1}^8(S_i-S)^2=1205

SPP=P2=i=18(PiP)2=55.9S_{PP}=\sum P^2= \displaystyle\sum_{i=1}^8(P_i-P)^2=55.9

SSP=(SP)=i=18(SiS)(PiP)=22.4S_{SP}=\sum(SP)=\displaystyle\sum_{i=1}^8(S_i-S)(P_i-P)=22.4

α=SPβ\alpha=S-P\beta and β=(SP)(S2)1/2×(P2)1/2\beta=\frac{(\sum SP)}{(\sum S^2)^{1/2}\times (\sum P^2)^{1/2}} =(225.4)(1205)1/2×(55.9)1/2=0.8685=\frac{(225.4)}{(1205)^{1/2}\times (55.9)^{1/2}}=0.8685

from the table S=Si/n=225/8=28.125S=\sum S_i/n=225/8=28.125

P=Pi/n=37/8=4.625P=\sum P_i/n=37/8=4.625

α=28.1254.625×0.8685=24.1082\alpha=28.125-4.625\times0.8685=24.1082

a) the estimated regression line is, S=24.1082+0.8685PiS=24.1082+0.8685P_i


b) the standard error (SE) of α\alpha and β\beta are

SE(α)=σ1/n+P2/SppSE(\alpha)=\sigma \sqrt{1/n+P^2/S_{pp}}

and SE(α)=σ/SppSE(\alpha)=\sigma/\sqrt{S_{pp}}

σ2=1/(n2)SSE=1/(n2)[Sssβ2Spp]=1/(82)[12050.86852×55.9]\sigma^2=1/(n-2)SSE=1/(n-2)[S_{ss}-\beta^2S_{pp}]=1/(8-2)[1205-0.8685^2\times 55.9]

=1/6×1162.8351=193.8058=1/6\times1162.8351=193.8058

σ=193.8058=13.9214\sigma=\sqrt{193.8058}=13.9214

SE(α)=σ1/n+P2/Spp=13.9214/55.9=13.9214/7.4766=1.86199SE(\alpha)=\sigma \sqrt{1/n+P^2/S_{pp}}=13.9214/\sqrt{55.9}=13.9214/7.4766=1.86199


c) testing for hypothesis 

H0:β=0 versus H1:β0H_0:\beta=0 \space versus \space H_1:\beta \not= 0

at α=0.05\alpha=0.05

t=(β0)/(SE(β))t=(\beta-0)/(SE(\beta))

t=0.8685/1.86199=0.4664t=0.8685/1.86199=0.4664

tcritical=2.4469t_{critical}=2.4469

t<2.4469|t|\lt2.4469

we fail to reject H0H_0 , that means at α=0.05,P doesnt affect S\alpha=0.05, P\space doesn't\space affect \space S

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be the first!
LATEST TUTORIALS
APPROVED BY CLIENTS