ECO 301: Milestone One

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Product Description
ECO 301: Milestone One
Step 1
Download the Regression Analysis Practice document (Excel file).
Step 2
Make sure you have the Data Analysis ToolPak add-in for your Excel. You can do that
by going to the Data tab and searching for Data Analysis. If it does not appear, you
will need to download it. The steps to download add-ins varies with each version of
Excel. Here are the steps for the 2007 version:
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Click on the Excel icon in the upper-left corner of your spreadsheet.
Click on Excel Options.
Along the left-side menu, click on Add-Ins.
Select Analysis ToolPak and follow the instructions.
Step 3
At the bottom, click on the “Demand for Jet Fuel” tab. The sample demand equation is
estimated using this data set, and the results are shown.
Step 4

Use the procedure described to estimate the demand for gasoline using the same
steps identified in the example below. Sample answers are based on the “Demand for
Jet Fuel” data.
Evaluate adjusted R​ 2​ .
The adjusted R​ 2​ is 0.778421. It indicates that approximately 78% of the variation in the
demand for jet fuel across states is explained by the three independent
variables—price, state GDP, and state population.
Evaluate each of the independent variables using a t-test.
Table 1 provides the results of the t-tests for each of the independent variables.
Standa
Coefficie
rd
P-Valu
nts
Error
T-Stat
e
45.286
-0.4074
0.6855
Intercept -18.4498
17
1
6
2.7885
0.0496
0.9606
Price 0.138429
82
41
19

0.0391
4.3426
7.45E-0
GDP 0.170079
65
46
5
Populati
0.0017
2.9480
0.0049
on 0.005281
91
36
67
Table 1: T-Test Analysis
To assist use the Student t-Value Calculator:
http://www.danielsoper.com/statcalc3/calc.aspx?id=10
The degrees of freedom are 47, and the probability is 0.05. The critical value is
approximately 2. If the absolute value of the t-statistic is greater than 2, the null
hypothesis can be rejected. The P-value results can be used to determine whether to
reject each of the following hypotheses.
Using the null hypothesis that each of the estimated coefficients is not significantly
different from zero, and a 5% probably level (or a 5% probability of obtaining the test
statistic as large or larger as the one obtained if the true value is in fact zero), the
coefficients for GDP and Population are significant (reject the null hypothesis that the
true values are 0), while coefficients for the intercept and price are not significant (do
not reject the null hypothesis that the true values of the coefficients are zero).
Price:

(a) H 0​
: ​βp = 0; ​H A
; ​βp ¹ 0 Do not reject at the 5% level (P-value
> 0.05)
GDP:
(b) H 0​
: ​βgdp = 0; ​H A
; ​βgdp ¹ 0 Reject at the 5% level (P-value < 0.05)
POP:
(c) H 0​
: ​βpop = 0; ​H A
; ​βpop ¹ 0 Reject at the 5% level (P-value < 0.05)
Perform an f-test.
H 0​
: ​βp = ​βgdp = ​βpop = 0;
H A
: at least one ​β is not equal to zero
below.
Use the analysis of variance (ANOVA) information given in the table
ANOVA

Significa
df SS MS F
nce F
Regressi
368163
122721
59.551
4.83988E-
on 3
.7
.2
15
16
96856.
2060.7
Residual 47
2
7
465019
Total 50
.9
Table 2: F-Test Analysis
F = 59.5515
Critical value
Critical F-Value Calculator:
http://www.danielsoper.com/statcalc3/calc.aspx?id=4

F(3,47) = 2.80235519
Since the 59.5515 > 4.00, reject the null hypothesis. At least one of the ​β’s is not equal
to zero. You can also use the “Significance of F” information, which indicates that the
critical value would need to be essentially zero to not reject the null hypothesis.
Step 5
Submit your regression results and answers to the questions given using the
Assignment link.