Ask Question, Ask an Expert

+61-413 786 465

Ask Econometrics Expert

problem: Following the general methodology used by econometricians as describeed in the session for week 1 (eight steps), describe how you would proceed to determine if a good complies with the Law of Demand.

problem: Find out how the Ordinary Least Squares (OLS) method estimates b1 and b2 for the simple linear equation (Y = B1 + B2 X). Once you had estimated the equation, elucidate how you would determine whether it is a good fit for the actual equation.

problem: Analyzing data at country level, Helble and Sato (2011) estimated the given relationship between the alcohol consumption per capita (Alc) and the growth rate of GDP per capita (gGDP).

Alc = 4.198 + 0.088 gGDP                    
R2 = 0.004,
n = 4829
Standard error = (0.144) (0.031)

a) Set up a 95% confidence interval for the slope (B2).
b) Using the confidence interval computed in (a) test the hypothesis that B2=0.
c) Test the significance at 5% of B2 by means of the t-test.  
d)  Discuss the relationship this equation reflects, elaborating on the meaning of the R2, and the result of the t-test.

problem: In the table below you can find data on the recommended retail price for a 20 cigarette pack (RRP, pounds sterling) and UK consumption of cigarettes (UKDP, in billion cigarettes) for 20 years. Data is sourced from the Tobacco Manufacturers' Association.

a) Discuss the relationship, if any, you would expect between the two variables.
b) Draw the scatter plot between UKDP and RRP.
c) Do an OLS regression, interpret and discuss your results fully. 
d) Establish a 95% confidence interval for the slope and test the hypothesis that the true slope coefficient is zero.
e) Suppose the government decides to increase tax so that the RRP reaches £6. Forecast consumption at this price level.

685_UKDP and RRP.jpg


a) Design a simple econometric project to identify the factors that affect the demand for a good or service of your preference. Estimate the significance of these factors using multiple regression analysis (at least two explanatory variables) and using at least 20 data points. Use a full range of econometric techniques in your project including estimating your model using absolute values and natural logs of these values.

Interpret the coefficients, their individual statistical significance, joint significance, and model goodness-of-fit in order to evaluate the usefulness of the econometric techniques in identifying the factors that affect demand.

b) Estimate the demand equation in (a) with only one explanatory variable and compare your results with those in (a) identifying the consequences of this type of specification error.


a) Give two exs of economic variables that can introduce a multi-collinearity problem into your OLS estimation and two other exs for heteroscedasticity.

b) Discuss the problems and practical issues both multicollinearity and heteroscedasticity may create on the variables you have chosen in (a).

c) Briefly describe the possible solutions you could apply to resolve the issues identified in (b).

problem: The following equation is estimated to assess the effects of gender and education on wages (standard errors in brackets):

ln(wage) = 0.389 – 0.227 female + 0.082 educ – 0.0056 female . educ
(0.119)  (0.168)             (0.008)          (0.0131)
n = 526, R2 = 0.441

Where wage is the wage in dollars per hour, female is a dummy variable indicating female gender (1) or otherwise (0), and educ is the years of education.

a) Interpret the equation and the goodness-of-fit.
b) Test the individual significance of the coefficients for female, educ, and the interaction effects at the 1%, 5%, and 10% levels.
c) Is this estimation likely to be affected by autocorrelation? describe why.

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9187

Have any Question? 

Related Questions in Econometrics

Basic econometrics research report group assignment -this

Basic Econometrics Research Report Group Assignment - This assignment uses data from the BUPA health insurance call centre. Each observation includes data from one call to the call centre. The variables describe several ...

Question - consider the following regression model for i 1

Question - Consider the following regression model for i = 1, ..., N: Yi = β1*X1i + β2*X2i + ui Note that there is no intercept in this model (so it is assumed that β0 = 0). a) Write down the least squares function minim ...

Economics and quantitative analysis linear regression

Economics and Quantitative Analysis Linear Regression Report Assignment - Background - In your role as an economic analyst, you have been asked the following question: how much does education influence wages? The Excel d ...

Monte carlo exercisein order to illustrate the sampling

Monte Carlo Exercise In order to illustrate the sampling theory for the least squares estimator, we will perform a Monte Carlo experiment based on the following statistical model and the attached design matrix y = Xβ + e ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As