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Below are data for U.S. DPI and PCE on two main components of consumer spending, motor vehicles and parts and housing and utilities. One is a durable good and the other is comprised of housing and other services and non-durables, such as natural gas purchases. Using scatter diagrams and trend lines generate graphs showing the relationship of each of the consumption categories to DPI and discover the equation of the graph and the R squared. Use your results to answer the questions to the right.

Questions:

1. Plot the data using a scatter plot.                             

2. Discover the equation that shows the relationship among motor vehicles and parts expenditure (PCE) and DPI (insert a linear trend line and show the equation on the scatter plot).                   

3. Discover the equation that shows the relationship among housing and utilities expenditures (PCE) and DPI (insert a linear trend line and show the equation on the scatter plot).                       

4. What is the R squares for the equations? Which one is better? Can you provide an economic rationale to describe the difference?                              

5. Use the equations to calculate estimated values for both kinds of expenditures for 2011 and 2012. How well did the equations predict values for 2011 and 2012?                      

6. If DPI increases at a rate of 2.2% in 2013 and then at a rate of 2.6% in 2014, what are the predicted values for consumer spending on motor vehicles and parts? On housing and utilities? 

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91224374

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