# TECO201 ELEMENTS OF ECONOMETRICS

SOLUTION AT Australian Expert Writers

Assignment 2Unit: TECO201 ELEMENTS OF ECONOMETRICSDue Date: Sunday 15 Feb 2021Total Marks: 20 marksInstructions: All questions should be attempted.The marks of each question would be awarded based onyour understanding of the questions, concepts andprocedures; hence you should demonstrate your answersstep by step.Question 1 [5 marks]Based on 11 annual observations, the following regression were obtained:

Model A:

Yt

=se

2.69110.1216

-0.4795Xt0.1140

r2=0.6628

Model A:

Yt

=se

0.77740.0152

-0.2530lnXt0.0494

r2=0.7448

Where Y is the cups of coffee consumed per person per day and X is the price of coffeein $ per pound

i)

Interpret the slop coefficients in the two model

(1 mark)

ii) You are told that the mean value of Y & X is 2.43 and 1.11 respectively, estimate

the price elasticity for model A

(2 marks)(2 marks)

iii) What is the price elasticity for model B

Question 2 [5 marks]Considering the following modelSalest=B1+B2D2t+ B3D3t+ B4D4t +uiWhere Sales =the retail sales of hobby, toy and game storesD2=1 in the second quarter,

=0

if otherwise

D3=1 in the third quarter,

=0

if otherwise

D4=1 in the fourth quarter,

=0

if otherwise

Using the data for the period 1992 to 2012, a business analyst obtained the followingregression result:Salest=930.412+58.667D2t+ 57.609D3t+ 1338.109D4tt-value (21.6) (0.96) (0.931) (21.63) R2=0.913i) What is the interpretation of the coefficients? (2 marks)ii) Given B2>B3, what conclusion would you can draw? (2 marks)iii) Discuss the logical reason for why the results are this way. (1 mark)Question 3 [5 marks]A sample of 200 Sydney households was taken to investigate how far Australianhouseholds tend to travel when they take vacation. Measuring distance in miles peryear, the following model was estimated:miles = 0 + 1income + 2age+ 3kids + uWhere age is the average age of the adult members of the household.After sorting observations by income and applying OLS to the first 100 and thesecond 100 observations the following estimates for the SSR were obtained:RSS2=2.95*107 and RSS1=1.04*107.Use Goldfeld-Quandt test to test for homoskedasticity, including the specificationof the null and the alternative hypothesis.i) Calculate the ratioWhere RSS are sum squared residences from two regressions, and df is degreeof freedom calculated by (n-k-1), n is number of observation and k is the number

of parameters.

(2 marks)

Find F value from F-distribution table given the significant level of 5%.

(1 mark)(2 marks)

Make your decision and conclusion.

ii) iii) Question 4 [5 marks]To explain what determines the price of air conditioners, a business analyst obtainedthe following regression results based on a sample of 19 air conditioners:

Yi=-68.236+0.023X2i +19.729X3i+7.653X4i

R2=0.84

Se

(0.005) (8.992)

(3.082)

where Yi = the price, in dollarsX2 = the BTU rating of air conditionerX3 = the energy efficiency ratioX4 = the number of settingsi) Interpret the regression results. (3 marks)ii) At α = 5%, test the hypothesis that the BTU rating has no effect on the price of anair conditioner versus that it has a positive effect. (2 marks)2 1/ /RSS dfRSS df =

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