SCENARIO 14-13 An Econometrician Is Interested in Evaluating the Relationship of Demand

question 256

Short Answer

SCENARIO 14-13
An econometrician is interested in evaluating the relationship 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 Scenario 14-13,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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