The demand function for good X is Qd x a � bPx � cM � e, where Px is the

Question

price of good X and M is income. Least squares regression reveals that â
8.27, bˆ �2.14, cˆ 0.36, s
aˆ 5.32, sbˆ 0.41, and scˆ 0.22. The
R-squared is 0.35.
a. Compute the t-statistic for each of the estimated coefficients.
b. Determine which (if any) of the estimated coefficients are statistically different from zero.
c. Explain, in plain words, what the R-square in this regression indicates.