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1. State whether the following statements are frue, false or uncertain, and justify your answers. a) "Consider the following demand function: y= ax®, where y is the quantity of good W demanded, x is price of good W and a is a constant. This model is non-linear in variablex; therefore, it can be directly estimated by Ordinary Least Squares method. b) "OLS estimators are both linear and unbiased but not the best among the class of linear and unbiased estimators." c) "Ifr between (X, Y) is positive, then r between (-X, -Y) is also positive."

1. State whether the following statements are frue, false or uncertain, and justify your answers. a) "Consider the following demand function: y= ax®, where y is the quantity of good W demanded, x is price of good W and a is a constant. This model is non-linear in variablex; therefore, it can be directly estimated by Ordinary Least Squares method. b) "OLS estimators are both linear and unbiased but not the best among the class of linear and unbiased estimators." c) "Ifr between (X, Y) is positive, then r between (-X, -Y) is also positive."

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter4: Estimating Demand
Section: Chapter Questions
Problem 7E
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1. State whether the following statements are frue, false or uncertain, and justify your answers. a) "Consider the following demand function: y=ax°, where y is the quantity of good W demanded, x is price of good W and a is a constant. This model is non-linear in variable x; therefore, it can be directly estimated by Ordinary Least Squares method. b) "OLS estimators are both linear and unbiased but not the best among the class of linear and unbiased estimators." c) "Ifr between (X, Y) is positive, then r between (-X, -Y) is also positive." 2. We are trying to predict the annual supply for good Z, by using the following estimated supply function, Q = 6.44 + 0.82 P (2.08) (0.25) where Q denotes the annual supply for good Z (in tones) and P is the price of good Z (in TL). The values given in parentheses are standard errors. 8 observations are used in OLS estimation. SST=36 and SSR=12.95. a) Are the signs of the regression coefficients as one would expect? Also, interpret the estimated slope coefficient. b) Find and interpret the coefficient of determination. c) Find and interpret the sample coefficient of correlation.
Transcribed Image Text:1. State whether the following statements are frue, false or uncertain, and justify your answers. a) "Consider the following demand function: y=ax°, where y is the quantity of good W demanded, x is price of good W and a is a constant. This model is non-linear in variable x; therefore, it can be directly estimated by Ordinary Least Squares method. b) "OLS estimators are both linear and unbiased but not the best among the class of linear and unbiased estimators." c) "Ifr between (X, Y) is positive, then r between (-X, -Y) is also positive." 2. We are trying to predict the annual supply for good Z, by using the following estimated supply function, Q = 6.44 + 0.82 P (2.08) (0.25) where Q denotes the annual supply for good Z (in tones) and P is the price of good Z (in TL). The values given in parentheses are standard errors. 8 observations are used in OLS estimation. SST=36 and SSR=12.95. a) Are the signs of the regression coefficients as one would expect? Also, interpret the estimated slope coefficient. b) Find and interpret the coefficient of determination. c) Find and interpret the sample coefficient of correlation.
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