Econ6000 Economic Principles And Assignment Answers
Answer:
|
Regression Statistics | |
|
Multiple R |
0.96 |
|
R Square |
0.91 |
|
Adjusted R Square |
0.90 |
|
Standard Error |
7.82 |
|
Observations |
21 |
|
ANOVA | |||||
|
|
df |
SS |
MS |
F |
Significance F |
|
Regression |
3 |
11019.2105 |
3673.0702 |
60.07749 |
2.94899E-09 |
|
Residual |
17 |
1039.36093 |
61.138878 |
|
|
|
Total |
20 |
12058.57143 |
|
|
|
|
|
Coefficients |
Standard Error |
t Stat |
P-value |
Lower 95% |
Upper 95% |
|
Intercept |
-12.1602 |
11.3076 |
-1.0754 |
0.2972 |
-36.0172 |
11.6968 |
|
Average income per person |
0.0048 |
0.0018 |
2.6652 |
0.0163 |
0.0010 |
0.0087 |
|
Tariff rate on imports of energy bars |
-6.4570 |
1.0416 |
-6.1990 |
0.0000 |
-8.6546 |
-4.2594 |
|
Number of stores where energy bars are offered |
4.0724 |
1.8978 |
2.1459 |
0.0466 |
0.0684 |
8.0765 |
The regression analysis evaluates impact of income, tariff and number of stores on the demand for energy bars. From the regression it is found that income has a positive effect on demand while tariff has a negative effect on energy bar demand. So far as number of stores are concerned the coefficient is 4.0724. This positive and significant effect implies that offering energy bars to an additional store helps to increase energy bar demand
The coefficient of tariff from the regression is found to be -6.4570. The negative coefficient implies tariff has a negative effect on demand. With unit increase in tariff demand decreases by 6 units. The coefficient is statistically significant as indicated by the significant p value (value less than 0.05) (Draper & Smith, 2014).
PW in figure 1 represents the world price without nay restriction. After imposition of tariff price in the domestic market increases to Ptariff. Because of higher price after tariff, demand reduces from QD1 to QD2. The higher price reduces consumer surplus to A. Producer surplus increases to B + C. The lost consumer surplus however does not completely transfers to producers (Feenstra, 2015). This causes a misallocation of resources leading to a welfare loss represented by the area D + G.
As discussed in the previous section imposition of tariff in Industria causes a welfare loss in the market. In response to higher price of Scmeckt Gut’s energy bar people in Industria would substitute Schmeckt Gut’s energy bar with some cheaper brand that might affect consumer’s health. Because of tariff Schmeckt Gut would face a loss in the market share in Industria. Followed by standard theory of trade, it is thus mutually beneficial for both the nation to encourage free trade between the two nations (Viner, 2016). The theoretical overview of trade is further supported by the regression analysis. The regression analysis suggests indicates a significant negative effect of tariff on energy bar demand and welfare.
Reference list
Draper, N. R., & Smith, H. (2014). Applied regression analysis(Vol. 326). John Wiley & Sons.
Feenstra, R. C. (2015). Advanced international trade: theory and evidence. Princeton university press.
Viner, J. (2016). Studies in the theory of international trade. Routledge.
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