You have estimated the following model for demand of grape juice using one
hundred observations.
Qg= 150.83–0.75Pg+ 0.37Po+0.65Y.
(0.04) (0.23) (0.02) (0.52)R-square=0.78
Where, Qg=quantity demanded of grape juicebbottles.
Pg=price of grape juice per unit.
Po=Priceoforangejuice.
Y=Income.
Standard errors are in parenthesis.
a)Which partial slope coefficients are statistically different from zero? Which test do
you use and why?
b)Is the income coefficient equal to 1?
a) To determine which partial slope coefficients are statistically different from zero, we can use a t-test. The t-test will compare the estimated coefficient to zero and determine if the coefficient is statistically significant. The t-test will use the standard errors provided in the parentheses to calculate the t-statistic. If the t-statistic is greater than the critical value, then the coefficient is statistically different from zero.
b) No, the income coefficient is not equal to 1. The estimated coefficient for income is 0.65, which is not equal to 1.