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

question 237

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, the effect of living in San Francisco rather than Los Angeles is to increase the mean demand by an estimated ________ per capita.

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Definitions:

Units-Of-Activity

A depreciation method that allocates expenses based on the actual usage or activity levels of an asset.

Salvage Value

A projection of an asset's value at the end of its period of functionality.

Depreciation Cost

The systematic allocation of an asset's cost over its useful life to reflect the loss in value over time.

Plant Asset

Long-term tangible assets that are used in the production of goods and services, including machinery, buildings, and equipment.