Using regression analysis estimate consumption as the

Reference no: EM13394311

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:

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 R², 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?

Reference no: EM13394311

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