The McGraw-Hill Series Economics essentials of economics brue, McConnell, and Flynn Essentials of Economics

TABLE 6.9
*These data are from 
Advertising Statistics Year Book,
1996, and are reproduced from http://www.
Economicswebinstitute.org/ecdata.htm.
guj75772_ch06.qxd 07/08/2008 07:00 PM Page 180

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Chapter 6
Extensions of the Two-Variable Linear Regression Model
181
g.
How would you estimate the elasticity of cell phone demand with respect to PP-
adjusted income for the linear model given in Eq. (3.7.3)? What additional informa-
tion, if any, do you need? Call the estimated elasticity the 
income elasticity
.
h.
Is there a difference between the income elasticity estimated from the double-log model
and that estimated from the linear model? If so, which model would you choose?
6.21. Repeat Exercise 6.20 but refer to the demand for personal computers given in Eq. (3.7.4).
Is there a difference between the estimated income elasticities for cell phones and
personal computers? If so, what factors might account for the difference?
6.22. Refer to the data in Table 3.3. To find out if people who own PCs also own cell phones,
run the following regression:
CellPhone
i
=
β
1
+
β
2
PCs
i
+
u
i
a.
Estimate the parameters of this regression.
b.
Is the estimated slope coefficient statistically significant?
c.
Does it matter if you run the following regression?
PCs
i
=
α
1
+
α
2
Cellphone
i
+
u
i
d.
Estimate the preceding regression and test the statistical significance of the estimated
slope coefficient.
e.
How would you decide between the first and the second regression?