Question

QUESTION 20 From the Regression output below, what is the impact on the quantity demand of water when incomes increase by 3% Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.925 0.856 0.846 0.059 45 ANOVA 81.46 Regression Residual Total SMS 0.85 0.28 0.14 0.00 0.99 t Intercept PRICE INCOME WEATHER Coefficients 13.040 -0.200 1.500 0.124 Standard Error 0.758 0.063 0.079 0.065 Stat 17.194 -7.904 13.162 1.909 P-value 0.000 0.000 0.000 0.063 A. Increase by 3% B. Decrease by 4.5% C. Increase by 4.5% D. Decrease by 0.6%

Answer 1

The income coefficient is 1.5. for every 1% increase in the income the quantity demanded is likely to be increased by 1.5*1 = 1.5%. therefore for an increase of 3% in the income, quantity demanded is likely to increase by 1.5*3% which is 4.5 %.

Select option C.