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.

---

Definitions:

Car Loan

A financial loan specifically used to purchase a car, typically secured against the vehicle itself and paid back over a set period.

First Payment

The initial payment made in a series of payments, commonly referring to the first installment of a loan or lease.

Compounded Semi-Annually

Calculation of interest where the amount is recalculated and added to the principal every six months.

First Three Years

The initial period of time covering three consecutive years, often cited in contexts of growth, development, or performance assessment.