+1-415-670-9189
info@expertsmind.com
Estimate of cross-price elasticity of demand for gasoline
Course:- Econometrics
Reference No.:- EM13149057




Assignment Help
Assignment Help >> Econometrics

1. Here we will be using the same dataset from Empirical Exercise 2; the file is included in the Assignments folder for this week. The filename is "gas_expenditure_hw3.gdt". It is already in Gretl format so you simply need to save it to your computer, open Gretl, click file > open data > user file and browse for the file. This file includes the variable that we constructed in the exercise, RealGasCap, real per capita gasoline expenditures. However, notice that I have scaled this variable to be measured in U.S. dollars to make interpretation more straightforward.

Therefore, our variable list is as follows:
Year = Year, 1953-2004
GasExp = total U.S. gasoline expenditure in billions of U.S. dollars
Pop = U.S. total population in thousands
Gasp = Price index for gasoline (in dollars)
Income = Per capita disposable income
PNC = Price index for new cars
PUC = Price index for used cars
PPT= Price index for public transportation
PD = Aggregate price index for consumer durables
PN = Aggregate price index for consumer nondurables
PS = Aggregate price index for consumer services
RealGasCap = real per capita gasoline expenditures (U.S. dollars)

a. Estimate the following log-linear model and display your results.

ln?RealGasCapt= β12 ln ?Incomet+ β3 ln?Gaspt+β4 ln?PNCt5 lnPUCt + ut
b. Provide an estimate of the own price elasticity of demand for gasoline. Is it statistically significant? Does it align with economic theory? Give an interpretation of your result.

c. Provide an estimate of the cross-price elasticity of demand for gasoline, both with respect to new cars and with respect to used cars. Are these estimates statistically significant? Do they align with economic theory? Give an interpretation of your result.

d. Provide an estimate of the income elasticity of demand for gasoline. Is it statistically greater than zero? In other words, is gasoline a normal good? Be sure to state your null and alternative hypotheses, your test statistic, your rejection region, and your conclusion. Give an interpretation of your result.

e. Suppose we are interested in whether the demand for gasoline is income inelastic. Construct a test of the hypothesis that the income elasticity is less than or equal to one against the alternative that it is greater than one. Be sure to state your null and alternative hypotheses, your test statistic, your rejection region, and your conclusion.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Econometrics) Materials
Tom earns $15 per hour for up to 40 hours of workeach week. He is paid $30 per hour for every hour in excess of 40.Tom faces a 20% tax rate and pays $4 per hour in child car
ECO395 - Assignment. Use the 95% confidence intervals for females, for experience and education, to check if the estimated values for males are in the intervals. Do you get
Suppose that firms continue to keep $1 per hour for administrative costs. Predict the new wage. e. Who bears the bulk of the housecleaning tax, wealthy households or poor on
Suppose that 1984 the total output in a single good economy was 7000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume
the PPC for each state, and then draw the graph for the PPC of the two states combined. On each graph, put the quantity of wheat on the vertical axis, and the quantity of co
Suppose the production manager is told to minimize the short-run total cost of producing Q units of output. While total output Q is exogenous, the manager can choose how muc
Consider the previous exercise with the situation before migration, and suppose that the government requires the rich residents to contribute 3/4 of the cost of local public
Maria can read 20 pages of economics in an hour. She can also read 50 pages of sociology in an hour, assuming she does not do anything else in that hour. She spends 5 hours