Problem
1. To study the demand for housing the following regression model was specified.
ln Q = B1 + B2 ln P + B3 ln Y + u
Where Q = measure of quantity of housing in square feet consumed by each of 3,120 families per year.
P = price per unit of housing in family's locality
Y = measure of family income.
The estimation results were
ln Q = 4.17 - 0.247 ln P + 0.96 ln Y R2 = 0.371 n = 3,120
standard errors (0.11) (0.017) (0.026)
Based on the results:
a. What is the price elasticity of demand?
b. What is the income elasticity of demand?
c. Do these make economic sense? Explain.
d. Test whether both elasticities are significantly different from zero at the 5 percent level.
e. According to the author of the study it is more interesting to test whether the income elasticity is significantly different from 1 at the 5 percent level. If it is not different from 1, what does that mean?
e. Test whether or not the independent variables are jointly significant.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.