Sunteți pe pagina 1din 36

200053 Economic Modelling

Economics and FinanceSchool of Business

WORKBOOK 4
Contains activities associated with HANDBOOK (B)

ANNA URO EVANGELISTA


MARIA ESTELA ALMINAZA-VARUA
2

This workbook belongs to:

STUDENT ID: ________________________________________________________________

First Name:__________________________________________________________________

Last Name:_________________________________________________________________________
3

Contents
ACTIVITY 1 ............................................................................................................................................... 1
ACTIVITY 2A ............................................................................................................................................. 2
ACTIVITY 2B ............................................................................................................................................. 4
ACTIVITY 2C ............................................................................................................................................. 6
ACTIVITY 3 ............................................................................................................................................... 8
ACTIVITY 4 ............................................................................................................................................. 11
ACTIVITY 5 ............................................................................................................................................. 15
ACTIVITY 6 ............................................................................................................................................. 18
ACTIVITY 7 ............................................................................................................................................. 21
ACTIVITY 8 ............................................................................................................................................. 25
ACTIVITY 9 ............................................................................................................................................. 29
1

ACTIVITY 1

Identify the Dependent variable, Independent variables, its Coefficients and Constant.

Constant
Dependent Coefficients including the
Equation Independent Variable/s include the
Variable sign.
sign
1
2
3
4
5
6
7
8
9
10

What does Negative relationship mean?

What does a Positive relationship mean?

Which equations have Independent variables that have a Negative relationship with the Dependent variables?
2

ACTIVITY 2A

Each set will refer to an equation. Complete the questions for this activity. There are four sets in this activity.

SET 1

i. Looking at the equation above, what is the coefficient of ?


ii. How much would change if rises by one unit?
iii. Will the value of increase or decrease if changes by one unit?
iv. What is the coefficient of ?
v. How much would change if rises by one unit?
vi. Will the value of increase or decrease if changes by one unit?

SET 2

i. Looking at the equation above, what is the coefficient of ?


ii. How much would change if rises by one unit?
iii. Will the value of increase or decrease if changes by one unit?
iv. What is the coefficient of ?
v. How much would change if rises by one unit?
vi. Will the value of increase or decrease if changes by one unit?
vii. A student noticed that the has changed by . Did the value of rise or drop? (Rise/Drop)
viii. Which variable lead to the change in ?

SET 3

i. If the value of changed by , which Independent variables value changed?


ii. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
iii. If the value of changed by , which Independent variables value changed?
iv. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
3

SET 4

i. If the value of changed by , which Independent variables value changed?


ii. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
iii. If the value of changed by , which Independent variables value changed?
iv. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
4

ACTIVITY 2B

Each set will refer to an equation. Complete the questions for this activity. There are four sets in this activity.

SET 1

i. Looking at the equation above, what is the coefficient of ?


ii. How much would change if rises by one unit?
iii. With the value of increase or decrease if changes by one unit?
iv. What is the coefficient of ?
v. How much would change if rises by one unit?
vi. With the value of increase or decrease if changes by one unit?

SET 2

i. If the value of changed by , which Independent variables value changed?


ii. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
iii. If the value of changed by , which Independent variables value changed?
iv. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)

SET 3

i. If the value of changed by , which Independent variables value changed?


ii. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)
iii. If the value of changed by , which Independent variables value changed?
iv. Did the change in this variable lead the value of to rise or drop? (Rise/Drop)

SET 4

i. Looking at the equation above, what is the coefficient of ?


ii. How much would change if rises by one unit?
iii. With the value of increase or decrease if changes by one unit?
iv. What is the coefficient of ?
v. How much would change if rises by one unit?
vi. Will the value of increase or decrease if changes by one unit?
5

vii. A student noticed that the has changed by . Did the value of rise or drop?
(Rise/Drop)
viii. Which variable lead to the change in ?
6

ACTIVITY 2C

Each set will refer to an equation. Complete the table for each set. There are four sets in this activity.

SET 1

Independent variable Will the Dependent variable rise () or drop () if How much would the Dependent
the Independent variable rises by 1 unit? variable rise or drop?

i. Referring to the equation on top of the table, list each variable on the first column.

ii. On the second column, indicate if a rise in the Independent variable will lead to a rise or drop in the
Dependent variable using the arrows. Do this for each Independent variable.

iii. On the last column, indicate by how much the Dependent variable will change if the Independent variable
changes by 1 unit.

SET 2

Independent variable Will the Dependent variable rise () or drop () if How much would the Dependent
the Independent variable rises by 1 unit? variable rise or drop?

i. Referring to the equation on top of the table, list each Independent variable on the first column.

ii. On the second column, indicate if a rise in the Independent variable will lead to a rise () or drop () in the
Dependent variable using the arrows. Do this for each Independent variable.

iii. On the last column, indicate by how much the Dependent variable will change if the Independent variable
changes by 1 unit.
7

SET 3

Independent variable Will the Dependent variable rise () or drop () if How much would the Dependent
the Independent variable rises by 1 unit? variable rise or drop?

i. Referring to the equation on top of the table, list each Independent variable on the first column.

ii. On the second column, indicate if a rise in the Independent variable will lead to a rise () or drop () in the
Dependent variable using the arrows. Do this for each Independent variable.

iii. On the last column, indicate by how much the Dependent variable will change if the Independent variable
changes by 1 unit.

SET 4

Independent variable Will the Dependent variable rise () or drop () if How much would the Dependent
the Independent variable rises by 1 unit? variable rise or drop?

i. Referring to the equation on top of the table, list each Independent variable on the first column.

ii. On the second column, indicate if a rise in the Independent variable will lead to a rise () or drop () in the
Dependent variable using the arrows. Do this for each Independent variable.

iii. On the last column, indicate by how much the Dependent variable will change if the Independent variable
changes by 1 unit.
8

ACTIVITY 3

Each question will either refer to a picture of a section on a screen or a printed output. You will be asked to identify
the different parts of the output. The parts of the output are as follows:

Sources of Error
Diagnostics
Estimates

You will then be asked to identify the part that has been boxed which is one of those listed above. Write the name
of the part beside the question heading. Keep page open on your handout. You will need to look at it for this
activity.

QUESTION 1 Name of part boxed below: ___________________________________________________________

QUESTION 2 Name of part boxed below: ___________________________________________________________


. regress salary age ceoten sales profits mktval college grad

Source | SS df MS Number of obs = 177


-------------+------------------------------ F( 7, 169) = 6.18
Model | 12377503.1 7 1768214.73 Prob > F = 0.0000
Residual | 48388461.6 169 286322.258 R-squared = 0.2037
-------------+------------------------------ Adj R-squared = 0.1707
Total | 60765964.7 176 345261.163 Root MSE = 535.09

------------------------------------------------------------------------------
salary | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .2315901 5.233669 0.04 0.965 -10.1002 10.56338
ceoten | 12.08182 6.082673 1.99 0.049 .0740108 24.08963
sales | .0181594 .0111477 1.63 0.105 -.0038473 .0401661
profits | .0364885 .2759932 0.13 0.895 -.5083497 .5813268
mktval | .0221108 .0159867 1.38 0.168 -.0094485 .0536701
college | -119.7005 250.7396 -0.48 0.634 -614.6856 375.2847
grad | -32.83416 83.32578 -0.39 0.694 -197.3276 131.6593
_cons | 739.1615 400.5255 1.85 0.067 -51.516 1529.839
------------------------------------------------------------------------------
9

QUESTION 3 Name of part boxed below: ___________________________________________________________

QUESTION 4 Name of part boxed below: ___________________________________________________________


. regress salary age ceoten sales profits mktval college grad

Source | SS df MS Number of obs = 177


-------------+------------------------------ F( 7, 169) = 6.18
Model | 12377503.1 7 1768214.73 Prob > F = 0.0000
Residual | 48388461.6 169 286322.258 R-squared = 0.2037
-------------+------------------------------ Adj R-squared = 0.1707
Total | 60765964.7 176 345261.163 Root MSE = 535.09

------------------------------------------------------------------------------
salary | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .2315901 5.233669 0.04 0.965 -10.1002 10.56338
ceoten | 12.08182 6.082673 1.99 0.049 .0740108 24.08963
sales | .0181594 .0111477 1.63 0.105 -.0038473 .0401661
profits | .0364885 .2759932 0.13 0.895 -.5083497 .5813268
mktval | .0221108 .0159867 1.38 0.168 -.0094485 .0536701
college | -119.7005 250.7396 -0.48 0.634 -614.6856 375.2847
grad | -32.83416 83.32578 -0.39 0.694 -197.3276 131.6593
_cons | 739.1615 400.5255 1.85 0.067 -51.516 1529.839
------------------------------------------------------------------------------

CONTINUED NEXT PAGE


10

QUESTION 5 Name of part boxed below: ___________________________________________________________

QUESTION 6 Name of part boxed below: ___________________________________________________________


. regress salary age ceoten sales profits mktval college grad

Source | SS df MS Number of obs = 177


-------------+------------------------------ F( 7, 169) = 6.18
Model | 12377503.1 7 1768214.73 Prob > F = 0.0000
Residual | 48388461.6 169 286322.258 R-squared = 0.2037
-------------+------------------------------ Adj R-squared = 0.1707
Total | 60765964.7 176 345261.163 Root MSE = 535.09

------------------------------------------------------------------------------
salary | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .2315901 5.233669 0.04 0.965 -10.1002 10.56338
ceoten | 12.08182 6.082673 1.99 0.049 .0740108 24.08963
sales | .0181594 .0111477 1.63 0.105 -.0038473 .0401661
profits | .0364885 .2759932 0.13 0.895 -.5083497 .5813268
mktval | .0221108 .0159867 1.38 0.168 -.0094485 .0536701
college | -119.7005 250.7396 -0.48 0.634 -614.6856 375.2847
grad | -32.83416 83.32578 -0.39 0.694 -197.3276 131.6593
_cons | 739.1615 400.5255 1.85 0.067 -51.516 1529.839
------------------------------------------------------------------------------
11

ACTIVITY 4

A researcher wanted to find out the factors that affect the salary awarded to Chief Executive Officers (CEO) of
companies. After reading previous research articles and reports; the researcher wanted to see if the CEOs age;
whether he had a university or college degree; a graduate degree or post university qualifications; sales revenue of
the company; profits made by the company; how much the company is worth; the number of years the CEO has
been working with the company and the number of years he/she was a CEO affected the salaries they received.

i. On the table below, write the Dependent variable and list the Independent variables. The number of rows
does not indicate the number of Independent variables.

Dependent variable: (Variable Name: )

Independent Variable Variable name in STATA Units

ii. Using the description of variables from STATA below, write the relevant variable names for the Dependent
variable and each Independent variable on the table above including any units of measurement used.

DO NOT GO TO THE NEXT PAGE UNTIL YOU HAVE COMPLETED THE TABLE.
12

A Table with the Dependent variable, Independent variable is shown below. Check your table from the previous
page with the one below.

Dependent variable: Salary of the CEO in thousands (Variable Name: salary )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Age of CEO Age Years
Whether the CEO has a university degree college
Whether the CEO has qualifications after university grad
Sales made by the company sales Millions ($)
Profits made by the company profits Millions ($)
How much the company is worth mktval Millions ($)
How long the CEO has worked with the company comten Years
How long the CEO has been in his/her position as CEO ceoten Years

The researcher had a general form for the equation that the researcher had was:

iii. Using this general form, write the symbol for the Dependent Variable on the table above.

i. Looking at the STATA output from the screen below, rewrite the general form into the estimated form on
the box at the bottom using the results below. If you need more space, use the back page.

DO NOT GO TO THE NEXT PAGE UNTIL YOU HAVE WRITTEN THE EQUATION.
13

Compare your equation with the one below. Make sure your coefficients & variables match with the ones below in
the right order.

The table from the previous page has been printed again below

Dependent variable: Salary of the CEO in thousands (Variable Name: salary )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Age of CEO Age Years
Whether the CEO has a university degree college
Whether the CEO has qualifications after university grad
Sales made by the company sales Millions ($)
Profits made by the company profits Millions ($)
How much the company is worth mktval Millions ($)
How long the CEO has worked with the company comten Years
How long the CEO has been in his/her position as CEO ceoten Years

Looking at the equation on the top of this page and referring to the table above about the variables, answer the
following questions.

a. If profits of a company rose by $1 million, will the CEOs salary rise or drop? (Rise/Drop)

b. Based on the coefficient, how much would the salary rise or drop?

c. If sales of a company rose by $1 million, will the CEOs salary rise or drop?

d. Based on the coefficient, how much would the salary rise or drop?

e. If a CEO stayed with the company for an extra year regardless of his/her position, will the CEOs salary rise or
drop? (Rise/Drop)

f. Based on the coefficient, how much would the salary rise or drop?

g. Of all the variables in the equation, which variable will lead to the largest rise in the salary of the CEO?
(TIP: Look for the largest coefficient that is Positive ( ) or greater than zero)

h. Of all the variables in the equation, which variable will lead to the largest drop in the salary of the CEO?
(TIP: Look for the largest coefficient that is Negative ( ) or less than zero)

i. Of all the variables in the equation, which variable will lead to the smallest rise in the salary of the CEO?
(TIP: Look for the largest coefficient that is Negative ( ) or less than zero)

j. Of all the variables in the equation, which variable will lead to the smallest drop in the salary of the CEO?
(TIP: Look for the largest coefficient that is Negative ( ) or less than zero)
14

k. They say that how much a company values an employee is reflected on their salary. Based on the equation
on the previous page, which of the attributes of a CEO listed below would a company value the most?
(TIP: Look at the coefficients of each of the variables below and find the one that brings the highest rise in
salary)

Independent Variable Variable name in STATA Units Symbol


Age of CEO Age Years
Whether the CEO has a university degree college
Whether the CEO has qualifications after university grad
How long the CEO has worked with the company comten Years
15

ACTIVITY 5

Another researcher wanted to find out the attributes that affect how much an employee earns in a month. The
researcher suspects that the hours worked per week, intelligence, age, education, years of experience and how long
they have stayed with their current employer affects how much they earn.

i. On the table below, write the Dependent variable and list the Independent variables. The number of rows
does not indicate the number of Independent variables.

Dependent variable: (Variable Name: )

Independent Variable Variable name in STATA Units

ii. Below is a description of the variables in the dataset. Complete the table above by finding the variable
names for each of the Independent variables and the Dependent variable on the table above. Do not forget
to include the units these variables were measured in. Note that IQ is a measure of intelligence.

DO NOT GO TO THE NEXT PAGE UNTIL YOU HAVE COMPLETED THE TABLE.
16

Compare your table with the one below.

Dependent variable: Earnings measured per month (Variable Name: wage )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Hours worked per week hours Average hours
Intelligence IQ Score
Age age Years
Education educ Years
Years of experience exper Years
How long they have stayed with their current employer tenure Years

The researcher came up with the general form shown below.

ii. Based on the equation above, write the symbol for the Dependent variable on the table.

iii. Below is the printed STATA output. Rewrite the general form into the estimated form on the box at the
bottom using the results below. If you need more space, use the back page.

. regress wage hours IQ educ exper tenure age

Source | SS df MS Number of obs = 935


-------------+------------------------------ F( 6, 928) = 33.37
Model | 27104117.3 6 4517352.88 Prob > F = 0.0000
Residual | 125612051 928 135357.813 R-squared = 0.1775
-------------+------------------------------ Adj R-squared = 0.1722
Total | 152716168 934 163507.675 Root MSE = 367.91

------------------------------------------------------------------------------
wage | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
hours | -2.297372 1.679588 -1.37 0.172 -5.593603 .9988598
IQ | 5.101527 .9390892 5.43 0.000 3.258542 6.944512
educ | 52.47722 7.278836 7.21 0.000 38.19234 66.76211
exper | 9.78444 3.739914 2.62 0.009 2.444771 17.12411
tenure | 6.087924 2.499958 2.44 0.015 1.181698 10.99415
age | 12.5442 4.721001 2.66 0.008 3.27912 21.80927
_cons | -736.7637 171.6533 -4.29 0.000 -1073.637 -399.8901
------------------------------------------------------------------------------
17

Compare your equations with the ones below. Make sure your coefficients & variables match with the ones below in
the right order.

The table about the variables has been reprinted below.

Dependent variable: Earnings measured per month (Variable Name: wage )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Hours worked per week hours Average hours
Intelligence IQ Score
Age age Years
Education educ Years
Years of experience exper Years
How long they have stayed with their current employer tenure Years

Based on the equation on the top of this page and the table above, answer the following questions.

a. If an employee works an extra hour per week, will their wage rise or drop? (RISE/DROP)
b. By how much will it rise or drop in a month?
c. Does working extra hours lead to higher wages? (YES/NO)
d. Looking at the equation, rank the variables that that brings the highest raise in wage (1) to the least (6).
(TIP: Look at the coefficients)

Independent Variable Symbol Rank


Hours worked per week
Intelligence
Age
Education
Years of experience
How long they have stayed with their current employer

e. Circle all the statements that can be supported by the equation and the table above.
A. Employers possibly value maturity.
B. IQ is possibly more important than Education when it comes to how much you can earn.
C. Education may possibly lead to higher wages than years of experience.
18

ACTIVITY 6

A social researcher wanted to see what are the factors that affects a convicted person to be arrested again by
looking at how many times they were arrested in 1986. The researcher obtained data on 2725 convicted persons in
the United States. He suspects that the number of arrest is depended on how much the convicted person has spent
time in prison through their lives, how long the person has been employed and their income. He suspects that once
convicted people find jobs that are fulfilling, they are more likely to stay employed and crime becomes less
attractive. Furthermore, if they earn more, there is no need to turn to crime to earn a living. If the convicted person
has spent a long time in jail through their lives, they are less likely to go back to crime because the experience was
not pleasant.

i. On the table below, write the Dependent variable and list the Independent variables. The number of rows
does not indicate the number of Independent variables.

Dependent variable: (Variable Name: )

Independent Variable Variable name in STATA Units

ii. Below is a description of the variables in the dataset. Complete the table above by finding the variable
names for each of the Independent variables and the Dependent variable on the table above. Do not forget
to include the units these variables were measured in.
19

Compare your table with the one below.

Dependent variable: Number of arrest (Variable Name: narr86 )


Symbol:

Independent Variable Variable name in STATA Units Symbol


How long they have been employed qemp86 Number of quarters
Income inc86 Thousands, $
How long they have spent in prison through their avgsen Months
lives (This is the only variable that
most likely reflect time spent
not just in the past 18
months or in 1986)

The researcher came up with the general form below:

i. In the table above, write the symbol for the Dependent variable.
iv. The researcher obtained the following results from the screen. Rewrite the general form into the estimated
form on the box at the bottom using the results below. If you need more space, use the back page.
20

Compare your equations with the ones below. Make sure your coefficients & variables match with the ones below in
the right order.

The table about the variables has been reprinted for you.

Dependent variable: Number of arrest (Variable Name: narr86 )


Symbol:

Independent Variable Variable name in STATA Units Symbol


How long they have been employed qemp86 Number of quarters
Income inc86 Thousands, $
How long they have spent in prison through their avgsen Months
lives

Answer the questions below.

a. If a convicted person worked for an extra quarter in 1986, would the number of times he/she was arrested
rise or drop? (TIP: Look at the coefficient for the number of quarters employed) (Rise/Drop)

b. By how many times would it have risen or dropped?

c. If a convicted person earned an extra $1,000 in 1986, would have they have more or less arrest in 1986?
(TIP: Look at the coefficient for income earned)

d. By how much or less arrest would they have received?

e. If a convicted person stayed one month longer in prison before, would they have had more or less arrest in
1986? (TIP: Look at the coefficient for time spent in prison)

f. By how much or less arrest would they have received?

g. Some lawmakers have said that sentences should be longer, making it more unpleasant for convicted
persons to stay in prison. Once released, they will be unlikely to commit a crime and are less likely to be
arrested again. Do you think the equation possibly support this view?

h. There are social workers who say that persons who are vulnerable to recommitting crimes should be placed
in a program to help them find employment. Once they have a job, they are less likely to commit a crime
again and have less arrest. Do you think the equation possibly support this view?
21

ACTIVITY 7

The social researcher in the previous activity estimated two equations, one for convicted persons who are Black and
those who are not.

The general form of the equation is:

The table of variables has been reprinted for you below

Dependent variable: Number of arrest (Variable Name: narr86 )


Symbol:

Independent Variable Variable name in STATA Units Symbol


How long they have been employed qemp86 Number of quarters
Income inc86 Thousands, $
How long they have spent in prison through their avgsen Months
lives

i. Below are the results for convicted persons who are Black. Rewrite the general form into the estimated
form on the box at the bottom using the results below. If you need more space, use the back page.

. regress narr86 avgsen qemp86 inc86 if black == 1

Source | SS df MS Number of obs = 439


-------------+------------------------------ F( 3, 435) = 6.19
Model | 25.0934246 3 8.36447487 Prob > F = 0.0004
Residual | 587.612726 435 1.35083385 R-squared = 0.0410
-------------+------------------------------ Adj R-squared = 0.0343
Total | 612.70615 438 1.39887249 Root MSE = 1.1623

------------------------------------------------------------------------------
narr86 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
avgsen | -.0153171 .0095745 -1.60 0.110 -.0341351 .003501
qemp86 | -.0736702 .0506227 -1.46 0.146 -.1731656 .0258253
inc86 | -.0025023 .0015664 -1.60 0.111 -.0055811 .0005764
_cons | .9300083 .0849052 10.95 0.000 .7631329 1.096884
------------------------------------------------------------------------------
22

ii. Below are the results for convicted persons who are not Black. Rewrite the general form into the estimated
form on the box at the bottom using the results below. If you need more space, use the back page.

. regress narr86 avgsen qemp86 inc86 if black == 0

Source | SS df MS Number of obs = 2286


-------------+------------------------------ F( 3, 2282) = 27.01
Model | 46.3966295 3 15.4655432 Prob > F = 0.0000
Residual | 1306.43102 2282 .572493873 R-squared = 0.0343
-------------+------------------------------ Adj R-squared = 0.0330
Total | 1352.82765 2285 .59204711 Root MSE = .75663

------------------------------------------------------------------------------
narr86 | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
avgsen | .0094363 .0056557 1.67 0.095 -.0016546 .0205271
qemp86 | -.0235958 .0140869 -1.68 0.094 -.0512203 .0040286
inc86 | -.0015993 .0003269 -4.89 0.000 -.0022404 -.0009581
_cons | .4958738 .0296144 16.74 0.000 .4377998 .5539477
------------------------------------------------------------------------------

Copy the equations you just wrote in the table below:

Black

Non - Black
23

Compare your equations with the ones below. Make sure your coefficients & variables match with the ones
below in the right order.

Black

Non - Black

Dependent variable: Number of arrest (Variable Name: narr86 )


Symbol:

Independent Variable Variable name in STATA Units Symbol


How long they have been employed qemp86 Number of quarters
Income inc86 Thousands, $
How long they have spent in prison through their avgsen Months
lives

Using the table about the variables and the equations above, answer the questions below and on the next page.

a. A convicted person worked for 4 quarters and earned $10,000 in 1986 and have on average spent 6 months
in jail through their lives. Would the number of arrest be higher or lower than if he/she was Black? Use the
space below to find the number of arrest if they were Black and Non-Black. If you need more space, use the
back page.
24

b. A convicted person worked for 2 quarters and earned $5,000 in 1986 and have on average spent 6 months in
jail through their lives. Would the number of arrest be higher or lower than if he/she was Black? Use the
space below to find the number of arrest if they were Black and Non-Black. If you need more space, use the
back page.

Looking at the equations on the previous page, answer the following questions below.

c. If a convicted person worked for an extra quarter in 1986, would the number of arrest be more if he/she
were Black or Non-Black?

d. If a convicted person earned an extra $1,000 in 1986, would the number of arrest be more if he/she were
Black or Non-Black?

e. If a convicted person spent an extra month in prison, would the number of arrest be more if he/she were
Black or Non-Black?

f. Which part of the equation would lead to more arrest for Blacks than Non-Blacks?
25

ACTIVITY 8

A tax auditor wanted to know the factors that affect the salaries awarded by companies to their Chief Executive
Officers (CEOs) in 1990. The tax auditor thinks that the variables that affect salaries include sales revenue of the
company, return on stock and return on equity.

i. On the table below, write the Dependent variable and list the Independent variables. The number of rows
does not indicate the number of Independent variables.

Dependent variable: (Variable Name: )

Independent Variable Variable name in STATA Units

ii. The description of the dataset is shown below. Indicate which variable names correspond to the
Independent Variables you identified on the table above.
26

Compare your table with the one below.

Dependent variable: Salary in Thousands (Variable Name: salary )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Sales sales Millions, $
Return on Stock ros $, average return
Return on Equity roe $, average return

The auditors general form for the equation is shown below:

i. Using the equation above, write the symbol for the Dependent variable on the table above.
ii. The auditor decided to estimate two equations. One for companies in the in the finance industry and
those who are in other industries. Below are the results. The top output is the estimates for finance
companies and the bottom for other industries. Rewrite the general form into the estimated form on
the next page for each group using the results below. If you need more space, use the back pages.
27

Copy the equations you just wrote in the table below.

Finance

Other Industries
28

Compare your equations with the ones below. Make sure your coefficients & variables match with the ones
below in the right order.

Finance

Other Industries

Dependent variable: Salary in Thousands (Variable Name: salary )


Symbol:

Independent Variable Variable name in STATA Units Symbol


Sales sales Millions, $
Return on Stock ros $, average return
Return on Equity roe $, average return

Using the equations above and the table about the variables, answer the questions below.

a. If there is a dollar rise on the Return on Stock, would the salary of the CEO be higher if he/she is in the
Finance industry? (YES/NO)

b. By how much would the salary rise or drop by?

c. If there is a dollar rise on the Return on Equity, would the salary of the CEO be higher if he/she is in the
Finance industry? (YES/NO)

d. By how much would the salary rise or drop by?

e. If sales rose by $1 million, would the salary of the CEO be higher if he/she is in the Finance industry?
(YES/NO)

f. By how much would the salary rise or drop by?

g. If a finance company released its annual report to its shareholders. It showed that its average return on
stock rose and the salary of its CEO rose. Based on the equations, is it possible that the companys
decision is unusual? (YES/NO)

h. If a retail company released its annual report to its shareholders. It showed that its average return on
stock rose and the salary of its CEO rose. Based on the equation, is it possible that the companys
decision is unusual? (YES/NO)
29

ACTIVITY 9

A marketer of ecolabeled apples have explored the factors that affect the quantity sales of his product. Ecolabeled
apples are thought of to be more nutritious. Ecolabeled apples are environmentally friendly as they only use organic
fertilisers. Parents of infants want to feed their children healthier food. School children and teenagers are now
choosing healthier snacks. Adults are becoming more concerned about the nutritive value of the food they eat. As a
result, the age composition of households has been found to be an important factor in selling the product. As
ecolabeled apples are more expensive, income of households has played an important role. Other factors that has
been found to affect sales include price of ecolabeled apples and regular apples. The marketer used kilograms as a
measure of quantity.

i. On the table below, list the Independent variables. The number of rows does not indicate the number of
Independent variables. The Dependent variable has been completed for you.

Dependent variable: Kilos of ecolabeled apples bought (Variable Name: )

Independent Variable Variable name in STATA Units

ii. Below is a description of the variables in the dataset. Complete the table above by finding the variable
names for each of the Independent variables and the Dependent variable on the table above.
30

Compare your table with the one below.

Dependent variable: Kilos of ecolabeled apples bought (Variable Name: ecokilos)


Symbol:

Independent Variable Variable name in STATA Units Symbol


Price of regular apples regprckg Dollar price per kilo
Price of ecolabeled apples ecoprckg Dollar price per kilo
Income of household faminc Thousands, $
Infants numlt5 No. of persons
School children and teenagers in the household num5_17 No. of persons
Adults in the household num18_64 No. of persons
numgt64 No. of persons

The general form of the equation is as follows:

i. Based on the equation, write the symbol for the Dependent variable.
ii. The marketer wanted to see if the estimates would be different between male and female head of
households. He estimated two equations. The printed output below shows the results for both. The top
output shows the results for household where the head of the family is male and the bottom output for
female. Rewrite the general form into the estimated form on the next page using the results below. If you
need more space, use the back pages. Do not be surprised if your equation is two lines long or more.
. regress ecokilos faminc numlt5 num5_17 num18_64 numgt64 regprckg ecoprckg if male == 1

Source | SS df MS Number of obs = 173


-------------+------------------------------ F( 7, 165) = 2.35
Model | 21.6466103 7 3.0923729 Prob > F = 0.0258
Residual | 216.90404 165 1.31456994 R-squared = 0.0907
-------------+------------------------------ Adj R-squared = 0.0522
Total | 238.55065 172 1.38692238 Root MSE = 1.1465

------------------------------------------------------------------------------
ecokilos | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
faminc | .0045474 .0026154 1.74 0.084 -.0006166 .0097114
numlt5 | .0702953 .1521012 0.46 0.645 -.2300202 .3706108
num5_17 | .3541262 .1224261 2.89 0.004 .1124025 .5958498
num18_64 | .0236476 .0972921 0.24 0.808 -.1684503 .2157455
numgt64 | .1213651 .2033823 0.60 0.552 -.2802022 .5229325
regprckg | .3658663 .3064455 1.19 0.234 -.2391936 .9709262
ecoprckg | -.4093585 .2566403 -1.60 0.113 -.9160808 .0973639
_cons | .4300649 .4210426 1.02 0.309 -.4012608 1.261391
------------------------------------------------------------------------------

. regress ecokilos faminc numlt5 num5_17 num18_64 numgt64 regprckg ecoprckg if male == 0

Source | SS df MS Number of obs = 487


-------------+------------------------------ F( 7, 479) = 3.70
Model | 32.0998997 7 4.58569996 Prob > F = 0.0007
Residual | 594.331118 479 1.24077478 R-squared = 0.0512
-------------+------------------------------ Adj R-squared = 0.0374
Total | 626.431017 486 1.28895271 Root MSE = 1.1139

------------------------------------------------------------------------------
ecokilos | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
faminc | .000247 .0014291 0.17 0.863 -.002561 .0030551
numlt5 | -.0510097 .0780478 -0.65 0.514 -.2043682 .1023487
num5_17 | .0062935 .0484681 0.13 0.897 -.0889429 .10153
num18_64 | .0242184 .060271 0.40 0.688 -.0942098 .1426465
numgt64 | .1313811 .1068239 1.23 0.219 -.0785203 .3412826
regprckg | .7163044 .1677071 4.27 0.000 .3867718 1.045837
ecoprckg | -.6683192 .1384242 -4.83 0.000 -.9403129 -.3963256
_cons | .806317 .2519252 3.20 0.001 .311302 1.301332
------------------------------------------------------------------------------
31

Copy the equations you just wrote in the table below.

Male Head of Household

Female Head of Household


32

Compare your equations with the ones below. Make sure your coefficients & variables match with the ones below in
the right order.

Male Head of Household

Female Head of Household

Dependent variable: Kilos of ecolabeled apples bought (Variable Name: ecokilos)


Symbol:

Independent Variable Variable name in STATA Units Symbol


Price of regular apples per kilogram regprckg Dollar price per kilo
Price of ecolabeled apples per kilogram ecoprckg Dollar price per kilo
Income of household faminc Thousands, $
Infants numlt5 No. of persons
School children and teenagers in the household num5_17 No. of persons
Adults in the household num18_64 No. of persons
numgt64 No. of persons

a. If the cost of regular apples is $2 per kilo, cost of ecolabelled apples is $3 per kilo, household income is
$60,000 and one adult is aged 60 and another aged 80, would the amount of ecolabeled apples be higher if
the head of household was male or female? Use the space below and the back page to calculate the
quantity.
b. What is the difference in the amount bought between the two households?
c. The marketer wants to promote that ecolabeled apples help infants to develop a healthy immune system.
To which head of household would he have more success, male or female? (TIP: compare the coefficients
for the number of infants in both equations)

d. Which head of household is more sensitive to the price of ecolabeled apples, male or female? (TIP: compare
the coefficients for the price of ecolabeled apples in both equations)

e. If the price of regular apples rise, would the quantity bought of ecolabeled apples drop for both types of
households? (TIP: look at the coefficients for the price of regular apples in both equations)

f. Science has found the ecolabeled apples helps the elderly maintain good health. If the marketer wants to
advertise this finding, should he aim to reach households with a male or female head? (TIP: compare the
coefficients for the number of persons 64 years and over (numgt64) ecolabeled apples in both equations)

END

S-ar putea să vă placă și