TABLE 14-14 An Econometrician Is Interested in Evaluating the Relation of Demand

question 223

Short Answer

TABLE 14-14
An econometrician is interested in evaluating the relation of demand for building materials to mortgage rates in Los Angeles and San Francisco. He believes that the appropriate model is
Y = 10 + 5X₁ + 8X₂
where X₁ = mortgage rate in %
X₂ = 1 if SF, 0 if LA
Y = demand in $100 per capita
-Referring to Table 14-14, holding constant the effect of city, each additional increase of 1% in the mortgage rate would lead to an estimated increase of _____in the mean demand.

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