elasticity of demand

8.12.      From the data for 46 states in the United States for 1992, Baltagi obtained the following regression results†:

l---og C =  4.30  −  1.34 log P +  0.17 log Y

se = (0.91)     (0.32)           (0.20)

where C = cigarette consumption, packs per year

P = real price per pack

Y = real disposable income per capita

R¯  2  = 0.27

a.     What is the elasticity of demand for cigarettes with respect to  price? Is it statistically significant? If so, is it statistically different from one?

b.     What is the income elasticity of demand for cigarettes? Is it statisti- cally significant? If not, what might be the reasons for it?

c.     How would you retrieve R2 from the adjusted R2 given above?

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