Pt = relative price of bus transportation in year t. St = car stock per capita in year t. Dt = Dummy variable to separate pre-from post-world war 2 years: Dt = 0 for years 1929 to 1941, and Dt = 1 for years 1946 to 1961. a. Evaluate the sign and values of the coefficient. Qt = 22. 819 + 0. 0159 Xt 0. 1156 Pt 86. 106 St 0. 9841 Dt From the estimated demand equation for local bus service above indicate that: 1% increase in total per capita consumption expenditure (Xt) would increase 0. 0159% per capita personal consumption expenditures on bus transportation.
1% increase in relative price of bus transportation (Pt) would decrease 0. 1156% per capita personal consumption expenditures on bus transportation. 1% increase in car stock per capita (St) would decrease 86. 106% per capita personal consumption expenditures on bus transportation. 1% increase in Dummy variable (Dt) would decrease 0. 9841% per capita personal consumption expenditures on bus transportation. The Value of the Durbin Watson (D-W) statistic indicates that the hypothesis of no autocorrelation cannot be rejected. b.
Evaluate the statistical significant of the coefficients and the explanatory power of the regression. n = 29, k= 5, df = n k, df = 29 5 = 24 Assumption: the level of significance = 5% ? critical t value = 2. 064. b1 = 12. 23, b2 = 16. 84, b3 = 15. 83, b4 = 3. 22 Since the t statistic for b1, b2, b3 and b4 exceeds the critical value of 2. 064 for 24 df, both slope coefficient are statistically significant at 5%. Since the value of the calculated t statistic exceeds the critical t value of 2. 064, we conclude that both parameters are statistically different from 0 at the 5% level of significance.
R2 = 0. 996 = 0. 995 This means that the variation in total per capita consumption expenditure, relative price of bus transportation and car stock per capita explains 99. 5% of the variation in demand for local bus service when adjustment is made and 99. 6% when no adjustment is made. c. Evaluate the presence of possible econometric problems. n = 29, k = 5, dl = 1. 05, du = 1. 84 D-W = 1. 11, ranges of d is 0 and 4 Based on the graph above, the value of D-W is falls between du and dl, we can conclude that the test is inconclusive. Its means that there is no error between variables that correlated.