Economics 2122A/B Lecture : 398_39_solutions-instructor-manual_11-models-using-time-series-data_im_ch11.pdf
16 Jan 2014
School
Department
Course
Professor
Document Summary
11. 1 the results of linear and logarithmic regressions of consumer expenditure on food, food, on. Dpi and a relative price index series for food, prelfood, using the demand functions data set, are shown. Provide an economic interpretation of the coefficients and perform appropriate statistical tests. = 139. 4 + 0. 053 dpi + 0. 536 prelfood. = 2. 24 + 0. 50 lgdpi 0. 07 lgprfood. Answer: the linear specification indicates that a billion increase in income causes expenditure to increase by million, implying an allocation of 5. 3 cents out of the marginal dollar. A one point change in the price index causes expenditure on food to increase by million. Since food is measured in real terms, this is implausible and suggests that the model is misspecified. In the logarithmic specification, the income elasticity is 0. 50, which seems plausible. 11. 2 download the demand functions data set from the website (see appendix b).
