# Introductory econometrics assignment. The reasons for creating these two relative price variables is to demonstrate the impact of relative price changes of no.2 and no.3 canned tuna to the unit sales of brand no.1 canned tuna. As a result of that no.2 an

INTRODUCTORY ECONOMETRICS

ASSIGNMENT

PART 1

1.  By using ‘Genr’ function from eview, to generate two new relative price variables: RPRICE 2 = APR1/APR2 and RPRICE3 = APR1 / APR3. The reasons for creating these two relative price variables is to demonstrate the impact of relative price changes of no.2 and no.3 canned tuna to the unit sales of brand no.1 canned tuna.  As a result of that no.2 and no.3 canned tuna are the substitute goods of no.1 canned tuna.

The table above shows the result of estimate function:  .  is equalled to -1.858067, which means one unit change in RPRICE2 or the relative price change of no.1 and no.2 canned tuna will result in -1.858067 % change in SAL1 or unit sale of no.1 canned tuna. Also, the 95% confidence interval for  ΔRPRICE2 = [-1.858067 – 1.96*0.513899, -1.858067 + 1.96*0.513899] = [-2.8653,-0.8508]. Thus increase the RPRICE2 by 1 is associated in changing of SAL1 by between -2.8653 and -0.8508 points, with a 95 % confident level.

1. Assume: Null hypothesis:  the slope of the relationship of RPRICE2 and log(SAL1) is zero

Alternative hypothesis: the slope of the relationship of RPRICE2 and log (SAL1) is not zero

By simply looking at the p-value of RPRICE2 is equalled to 0.0007, which is less than 0.01 or 1% significant level. Therefore we can reject the Null hypothesis, and conclude that the relationship of RPRICE2 and log (SAL1) is statistically significant or not zero. This result also indicates that the relationship between RPRICE2 and log (SAL1) is strong, and increase in price of no.1 canned tuna will decrease the unit sales of brand no.1 canned tuna. The results are consistent with economic theory: increase in price of a particular product will encourage consumer to consume more of its substitute goods and lead to decrease in sale of this particular product.

1. D

The result of estimate function  is showed as above, and            has value of -3.054252. This means that one unit change in RPRICE 3 will associate in -3.054252% changes in SALT 1.  And the 95% confident interval for  ΔRPRICE3 is equalled to [-3.054252 -1.96*0.529132, -3.054252 +1.96*0.529132] or approximately [-4.0914, -2.0172], this also means one unit increase by RPRICE 3 will change the SAL1 by between -4.0914 and -2.0172 point, with 95% confident level.

1. Similar to part (c), we assume two hypothesises:

Null hypothesis:  the ...

#### Here's what a teacher thought of this essay

The author has produced excellent regression models and clearly understands what he/she is doing, with good econometric understanding. However, explanations and definitions of variables could make it clearer.