The following regression equation for quantity supplied was estimated
using a sample of fiftyobservations.
Q= 2.2 + 0.104P.
(3.4) (0.005)
Standard errors are in the brackets. The total sum of squares was 132 and the
residual sum of squares was 19.5.
a)Test the hypothesis that slope coefficient (ß1) = 0 falls within this
interval. Can we saytheprice has no effect on the quantity supplied? Use
the test of significant approach at 1% significance levelto test the above
hypothesis?
The null hypothesis is that the slope coefficient (ß1) = 0. The alternative hypothesis is that the slope coefficient (ß1) ≠ 0.
The test statistic is calculated as:
t = (0.104 - 0) / 0.005 = 20.8
The critical value for a 1% significance level is 2.58. Since the test statistic is greater than the critical value, we reject the null hypothesis and conclude that the price has an effect on the quantity supplied.