Unit 4

Question 1

What could a simple demand equation look like?

Answer 1

Q1 = β0 + β1P1 + β2P2 + β3I

Question 2

Describe the below equation by part:
Q1 = β0 + β1P1 + β2P2 + β3I

Answer 2

Quantity demanded for good 1 (Q1) is a linear function of the price for good 1 (P1), the price for good 2 (P2), and income (I)

Question 3

In the below equation what are the demand shifters?:
Q1 = β0 + β1P1 + β2P2 + β3I

Answer 3

P2 and I are demand shifters
And there are other factors that are demand shifters such as preferences, health concerns, government policies, etc…

Question 4

What could a regression model that represents the demand relationship look like?

Answer 4

Q1 = β0 + β1P1 + β2P2 + β3I + ε

Question 5

In the below equation which variables are dependent (y variable)?:
Q1 = β0 + β1P1 + β2P2 + β3I + ε

Answer 5

Q1

Question 6

In the below equation which variables are independent (x variable)?:
Q1 = β0 + β1P1 + β2P2 + β3I + ε

Answer 6

P1, P2, and I

Question 7

T/F: Parameter estimates are interpreted in the same units as the dependent variable(s) and give the rate of change for a one-unit change in the independent variable(s).

Answer 7

True

Question 8

How does the p-value help determine if something was observed by random chance?

Answer 8

p-value represents the probability that the observed effect could have occurred randomly, assuming the independent variable (x variable) has no impact on the dependent variable (y variable)

Question 9

Economists typically use a __a__% significance level (p-value < __b__) to decide whether a result is statistically significant.

Answer 9

a) 5%
b) 0.05

Question 10

What does a p-value of less than 0.05 show?

Answer 10

The coefficient is statistically different from zero and likely has a significant impact on the dependent variable.

Ex: The price of turkey and ones income has more significance on if you will consume turkey, than the price of beef or pork.