Data on electric power consumption in a Midwestern town (in billions of kilowatt hours), income (in millions of dollars), and electricity prices (in cents per kilowatt hour) for the period 1987-2001 are shown below:
Top Rated1Data on electric power consumption in a Midwestern town (in billions of kilowatt hours), income (in millions of dollars), and electricity prices (in cents per kilowatt hour) for the period 1987-2001 are shown below:
Year | Consumption | Income | Price |
1987 | 407.9 | 944.0 | 2.09 |
1988 | 447.8 | 992.7 | 2.10 |
1989 | 479.1 | 1,077.6 | 2.19 |
1990 | 511.4 | 1,185.9 | 2.29 |
1991 | 554.2 | 1,326.4 | 2.38 |
1992 | 555.0 | 1,434.2 | 2.83 |
1993 | 586.1 | 1,594.2 | 3.21 |
1994 | 613.1 | 1,718.0 | 3.45 |
1995 | 652.3 | 1,918.3 | 3.78 |
1996 | 679.2 | 2,163.9 | 4.03 |
1997 | 696.0 | 2,417.8 | 4.43 |
1998 | 734.4 | 2,613.7 | 5.12 |
1999 | 730.5 | 2,957.8 | 5.80 |
2000 | 732.7 | 3,069.3 | 6.44 |
2001 | 750.9 | 3,304.8 | 6.83 |
a) Using regression analysis, estimate consumption as a linear function of income, price, and the previous year's consumption (assume consumption in 1986 was 367.7 Billion kilowatt hours). Write the equation, the t-stats, the R^{2}, the Standard Error of the Estimate, and the F-statistic. Provide interpretation of the estimation (i.e., are the signs what you'd expect; what level of significance do the coefficients have, etc…). Provide a copy of your output from your regression analysis.
b). Assume that income in 2002 is $3,661.3 million and the price of electricity is 7.16 cent per kilowatt hour. Predict the consumption of electricity. How confident are you that the prediction is accurate?
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