1. Use the regression equation below to answer the following questions. Be sure to explain the reasoning behind your answers.
log Q demanded for widgets = -4.00 - 1.30 log Pwidgets + 1.19 log Income - 0.14 log P Gidgets + e
t-Values (-2.56) (2.34) (-1.14)
Adjusted R 2 = 0.95, F Value = 10.20, Sample =1980-2011.
a. Explain whether or not each coefficient is significantly different from zero.
b. What percentage of the variation in log Q demanded for widgets is accounted for by the model?
c. Are widgets and gidgets complements or substitutes? Can you be confident of that conclusion? Why or why not.