You are concerned about the damage that automobile pollution is causing our nation’s environment and are interested in the effect that gasoline prices have upon gasoline consumption.
(a) Specify your economic model as well as your econometric model of gasoline consumption. In your econometric model, what are the unknown parameters and what is the interpretation of each parameter?
(b) What hypothesis will you test in your economic model of gasoline consumption? Would it be a one-tail or two-tail test, and why?