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

question 2

Short Answer

TABLE 13-13
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 Table 13-13, holding constant the effect of city, each additional increase of 1% in the mortgage rate would lead to an estimated increase of ________ per capita in the mean demand.

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