Econ241 Major Assignment: Linear Model
Added on 2020-05-08
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Running head: MAJOR ASSIGNMENT1Major AssignmentName:Institutional Affiliation:
MAJOR ASSIGNMENT2Major AssignmentPart 1 (Linear Model)A.Model 4: OLS, using observations 1953-2004 (T = 52)Dependent variable: PerCapCoefficientStd. Errort-ratiop-valueconst1181.58313.8993.76420.0005***Inc0.2186510.03584416.1001<0.0001***Gp−7.873421.57167−5.0096<0.0001***Pnc1.268232.369580.53520.5951Ps−18.07381.58039−11.4363<0.0001***T75.29812.13296.2061<0.0001***Mean dependent var4935.619S.D. dependent var1059.105Sum squared resid569458.3S.E. of regression111.2633R-squared0.990046Adjusted R-squared0.988964F(5, 46)915.0172P-value(F)7.97e-45Log-likelihood−315.6159Akaike criterion643.2319Schwarz criterion654.9393Hannan-Quinn647.7202rho0.692419Durbin-Watson0.615673Therefore, PerCapt = 1181.58 + 0.218651Inct – 7.87342Gpt + 1.26823Pnct – 18.0738Ps +75.298T +εtExplanation: Per household gas consumption is positively related to per capital disposable income, inverselyrelated to the price index for gasoline, positively related to the price index of new cars,
MAJOR ASSIGNMENT3negatively associated to the aggregate price index of the consumer services, and positivelyrelated to time trend. When the price index for gasoline increases, per household gasconsumption would decrease and vice versa.In the same way, when price for new cars rises, the household consumption will also increase,and vice versa. The rise in the aggregate price for consumer services would also decreasehousehold gas consumption, and vice versa. The estimated signs of these coefficients do agreewith my expectations. For instance, since cars are a luxury commodity, the price index for newcars would be expected to be inversely related to household gas consumption. B.
MAJOR ASSIGNMENT4Comment: From the scatter graph above, it is clear that as per capita disposable income (Inc) increases, perhousehold gas consumption among consumer increases, because now consumers have hugedisposable incomes to spend on gas. However, any decrease in the per capital disposal increasewould decrease household gas consumption.
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