Step by Step Solutions

(See Solution) Starting with the data for problem 6 (see appendix for ch 4 below) and the data on the price related commodity for the years 1986 to 2005

Question: Starting with the data for problem 6 (see appendix for ch 4 below) and the data on the price related commodity for the years 1986 to 2005 given below, we estimated the regression for the quantity demanded of a commodity (which we now relabel Q X ), on the price of the commodity (which we now label P X ), consumer income (which we now label Y), and the price of the related commodity (P Z ), and we obtained the following results. (If you can, run this regression yourself; you should get results identical or very similar to those given below.)

YEAR 1986 1987 1988 1989 1990
P Z 14 15 15 16 17
YEAR 1991 1992 1993 1994 1995
P Z ($) 18 17 18 19 20
YEAR 1996 1997 1998 1999 2000
P Z ($) 20 19 21 21 22
YEAR 2001 2002 2003 2004 2005
P Z ($) 23 23 24 25 25

  1. Explain why you think we have chosen to include the price of commodity Z in the above regression. (b) Evaluate the above regression results. (c) What type of commodity is Z? Can you be sure?

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