Starting with the date from Problem 6 and the data on the price of a related commodity for the years 1986 to 2005 given below, we estimated the regression for the quantity demanded of a commodity (which we now relabel Qx), on the price commodity which we now label P_x, consumer income ( which we now label Y), and the price related commodity (P_(z) ), and we obtain the following results.
Year 1986 1987 1988 1989 1990
Pz ($) 14 15 15 16 17
Year 1991 1992 1993 1994 1995
Pz ($) 18 17 18 19 20
Year 1996 1997 1998 1999 2000
Pz($) 20 19 21 21 22
Year 2001 2002 2003 2004 2005
Pz($) 23 23 24 25 25
Qx =121.86-9P_x+0.04Y-2.21P_z
(-5.12) (2.18) (-0.68)
R^(2 )= .9633 F=167.33 D-W=2.38
(a) Explain why you think we have chosen to include the price commodity Z in the above regression. (b) Evaluate the above regression results. (c) What type of commodity is Z? Can you be sure?