Question

The following two models were estimated to analyze the demand for chicken around
Mzumbe universitycampus.
I.Qc = 43.310 –15.298Pc –9.86Pb + 39.8Pf + 1.87Y.
(3.05)(45.467)(13.44)(20.245)(0.154)
R-square=0.98
II.Qc=-17.288+61.138Pc+2.046Y.
(1.92) (22.8) (0.077)
R-square=0.99
Where Qc = quantity of chicken demanded in 2012.
Pc=price ofchicken.
Pb = price of beef.
Pf = price of fish.
Y=income.
The variances of Prices of beef and fish are respectively180.49and409.87,and their
covarianceis 112.54.Figuresinparenthesis are t-ratios.
Required:
i)It was stipulated that the prices of beef and fish are the same.Doyou agree with
this statement, why?
ii)Do the prices of beef and fish(jointly)influence quantity of chicken demand?

Answer 1

i)No, I do not agree with this statement. The t-ratios for the prices of beef and fish in the two models are different, indicating that the prices of beef and fish are not the same.

ii)Yes, the prices of beef and fish (jointly) influence the quantity of chicken demand. This is evidenced by the fact that the covariance between the prices of beef and fish is 112.54, indicating that there is a relationship between the two prices and the quantity of chicken demanded.