Question: states: Integrating Problem – Starting with the data for Problem 6 and the data on the price of a related commodity for the 1986 to 2005 given below, we estimated the regression for the quantity demanded of a commodity (which we now relabel ), on the price of the commodity (which we now label ), consumer income (which we now label Y) and the price of the related commodity ( ), and we obtained the following results:

Year 1986 1987 1988 1989 1990

($) 14 15 15 16 17

Year 1991 1992 1993 1994 1995

($) 18 17 18 19 20

Year 1996 1997 1998 1999 2000

($) 20 19 21 21 22

Year 2001 2002 2003 2004 2005

($) 23 23 24 25 25

=121.86-9.50 +0.04Y-2.21

(-5.12) (2.18) (-0.68)

=0.9633 F=167.33 D-W=2.38

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

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