ECON2206 PROJECT 1
MLR 1 (Linear in Parameters) – From observation of equation (2) we can see which the model inside the population may be written inside the form sumado a = β0 + β1X1 + …+ βkXk + u. Inside the model β1, β2 …βk are the unfamiliar parameters of interest and u is a great unobserved randomly error. log(TCi) = β1+ β2log(Qi) & β3log(pi1) & β4log(pi2) & β5log(pi3) + ui (2) MLR a couple of (Random Sampling) – This assumption takes on a randomly samples of d observations. We all deduce that this would be infeasible to collect the whole population of observations and thus one would assume that random sample was put on obtain a arbitrary sample of n findings. MLR 3 (No Best Collinearity) – This presumption requires that in the sample, none of the independent parameters is constant, and there are not any exact geradlinig relationships among the independent parameters. To determine if this sounds satisfied we must look at associations between each of the independent factors (output, plabor, pfuel, pkap). For MLR 3 to become violated 3rd party variables may not be perfectly correlated. We can tell that two independent factors are correctly correlated the moment one varying is a regular multiple of another. This clearly will not exist in our equation (2). Also there are no same explanatory variables that are scored in different units in our formula. Also inside our equation (2) we have by least k+1 observations. As a result we can determine that MLR 3 stands. MLR four (Zero Conditional Mean) – This assumption requires the error u has an expected value of 0 offered any principles of the self-employed variables. Through the given information we can consider the following issues: that there is not any misspecification in the functional form, we have simply no omitted varying bias, there is absolutely no measurement problem in the informative values, Xj is not really correlated with the error term. Thus MLR 4 holds. Question two
i) Units of measurement – Total Price: Million US$, Output: billion dollars KwH, wage: $/hr, value of energy: cent/btu, selling price capital: index...