Managerial Economics

In the excel sheet dataassignment2, a set of data is provided. In this exercise, you have to run different regression to find out the best model or demand function for good A.

Step 1: Run a regression with Y as depended variable and X1, X3, X4 and X6 as independent variable.

Step 2: Generate a variable lnY=ln(Y). This implies that you create a new variable by taking the natural logarithm of Y variable. Run a regression with lnY as depended variable and X1, X3, X4 and X6 as independent variables.

Step 3: Generate the other variable as lnX1=ln(X1), lnX3=ln(X3) and lnX6=ln(X6). This implies that you create three new variables by taking the natural logarithm of the variables X1, X3 and X6 respectively. Run a regression with lnY as depended variable and lnX1,ln X3, X4 and lnX6 as independent variables.

Choose the best model based on statistical criteria and your economic knowledge. Motivate your answer. Make comment on assumption(s) that are violated and the consequences of the violation of assumption in different models. You have to comment on all the coefficients, t- and F-statistics, R2, adjR2 and NOVA-table for all of the three models and compare these statistics. You will have to give a vivid economic and statistical analysis on all of the three models.