Question

i.month naturally coded Imonth 1 omitted) Source Number of obs 251046282 033427535 13 .019311252 Prob > F 0.000O 0.882!5 Adj R-squared-0.8500 02667 Residual 000711224 R-squared . 284473817 00474123 Root MSE ïnGas Coef Std. Err [95% Conf. Interval] -.3350421 . 4666989 -.0501979 059844 0580051 0922258 0984848 1095921 .1210783 0511898 0811551 0204031 0788326 -.6931444 0268061 -1 0.000 0.000 0.005 0.001 0.001 0.000 0.000 0.000 0.000 0.004 0.000 0.214 0.000 0.564 -.388969 .2163058 -, 0841454 0257594 0240455 0582386 0644243 0755359 0869694 0169535 0470963 -.0121574 0448497 -3.091252 - .2811151 . 7170919 - ,0162505 0939286 0919647 .1262131 .1325454 .1436482 1551872 085426 115214 0529636 .1128155 1.704963 lnInc Imonth 2 .1244659 0168747 0169428 0168807 0168944 0169309 0169287 0169549 0170182 01693 0161852 0168923 1.192056 Imonth 6 Imonth 8 Imonth 9 month 10 Imonth 12 cons

Interpret the coefficient on logged real gasoline price (lnP) in terms of the sign, magnitude and statistical significance. What does this estimate tell us about the average response of gasoline demand to changes in prices from 1975-1980.

[lnGas = ln(gascap)

lnP = ln(realprice)

lnInc = ln(inccap)

realprice = Real price of gasoline (2000 $)

gascap = Gas demanded per capita (gallons per month)

inccap = Real income per capita (2000 $)

date = Year and month of observation (text)

year = Year of observation

month = Month of observation]

Answer 1

The coefficient of lnP = -0.335421. The negative sign shows negative relationship between price and demand for gasoline.

The magnitute is very close to zero means ,elasticity is very less. For example, on average if the price of gasoline increases by 1unit in market, the demand for gasoline will by decreasing by only 0.3350421 units, which not so high. It is almost 33%.

Since the p-value is zero, implying that the coefficient is statistically significant. It is clear from the fact that, the calculated t value = -12.5 < - 0.388969( lower critical value at 95% confidance interwal).

The cofficient estimate tells us that, on average if price of the gasoline increases/decreases by absolute 1 unit, demand for gasoline will decreases/increase (opposite direction) by 0.3350421 units.