Answered: 21. Consider a firm subject to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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21. Consider a firm subject to quarter-to-quarter variation in its sales. Suppose that the following equation was estimated using quarterly data for the period 2011–2018 (the time variable goes from 1 to 32). The variables D1, D2, and D3 are, respectively, dummy variables for the first, second, and third quarters (e.g., D1 is equal to 1 in the first quarter and 0 otherwise).

Qt =a+bt+c1D1+c2D2+c3D3 The results of the estimation are presented here:

a. Calculate the intercept in each of the four quarters. What do these values imply?

b. Use this estimated equation to forecast sales in the fourth quarter of 2019.

DEPENDENT VARIABLE: QT
OBSERVATIONS:
32
VARIABLE
INTERCEPT
T
D1
D2
D3
R-SQUARE
0.9287
PARAMETER
ESTIMATE
245.251
-2.359
8.952
5.458
-8.699
F-RATIO
87.89
STANDARD
ERROR
41.570
0.632
2.222
1.288
1.890
P-VALUE ON F
0.0001
T-RATIO
5.90
-3.73
4.03
4.24
- 4.90
P-VALUE
0.0001
0.0009
0.0004
0.0002
0.0001

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