he following regression was estimated for 45 quarters to test the hypothesis that tire sales (T) depend on new-automobile sales (A) and total miles driven (M)
T = 0.45 + 1.41 (M) + 1.12 (A)
(0.32) (0.19) (0.41)
Where T is the % change in tire sales, M is the % change in miles driven, and A is the % change in new automobile sales. N=23, and R square = 0.83, the standard error of the regression = 1.2 and standard errors for the coefficients are listed in parentheses.
a) does the regression equation and its coefficients make economic sense? Explain.
b) Suppose "miles driven" is expected to fall by 2% and new auto sales to fall by 13% (due to forecast recession). What is the predicted change in the sales quantity of tires? If actual tire sales dropped by 18% would this be surprising?