Example Page 210

Regression Statistics
Multiple
R
0.987982
R Square
0.976108
Adjusted
R Square
0.969282
Standard
Error
0.036819
Observati
ons
10
ANOVA
df
Regressio
n

Residual

Total

Coefficie
nts
Intercept

2.329508

0.193088

0.878423

SS
0.3876
94
0.0094
9
0.3971
83
Standa
rd
Error
0.1824
25
0.0515
95
0.0619
38

MS
0.1938
47
0.0013
56

t Stat
12.769
71
3.7423
99
14.182
3

F
142.99
18

Pvalue
4.18E06
0.0072
4
2.06E06

Significa
nce F
2.11E-06

Lower
95%
1.898143
0.071086
0.731963

Upper
95%
2.7608
74
0.3150
91
1.0248
82

Lower
95.0%
1.8981
43
0.0710
86
0.7319
63

Upper
95.0%
2.760873
548
0.315090
813
1.024882
481

1. ln Q = ln A + ln K + ln L

ln Q = 2.322 + 0.194 ln K + 0.878 ln L

the values of and are 0.194 and 0.878. algorithim of 2.32 determines the value of A.
cobb-douglas Equation

Q= 10.2K0.194L0.878
2. a. we can say that the return to scale is increasing because the value of + is increased

than 1.

b. marginal product of capital MPK= 0.194x10.2K0.194-1L0.878

= 1.9788K-0.806L0.878
Marginal product of Labor MPL= 0.878 x 10.2 K0.194 L0.878-1
= 8.9556 K0.194 L-0.122
3. MPK at k= 20, L= 30

= 3.5 units
Meaning that one unit change in capital , while labor constant at 30 , will lead to 3.5 units
change in output.
MPL ,at k= 20, L= 30
= 10.58 units
The above calculation shows that if there is a change in labour by 1 unit and we keep the
capital constant at the value of 20 than output which we will attain that will be changed
by 10.58 units.

6-22 page 221

Regression Statistics
Multiple R
0.992948
R Square
0.985946
Adjusted R
Square
0.981931
Standard
Error
0.037846
Observations
10
ANOVA
df
2
7
9

SS
MS
F
0.703371 0.351686 245.5399
0.010026 0.001432
0.713397

Coefficients
4.199536
0.401266
0.307087

Standard
Error
t Stat
P-value
0.419217 10.01757 2.11E-05
0.197895 2.027674 0.082194
0.115012 2.670042 0.031998

Regression
Residual
Total

Intercept
L
K

Significance
F
3.29E-07

Upper
Lower
Upper
Lower 95%
95%
95.0%
95.0%
3.208245 5.190828 3.208245 5.190828
-0.06668 0.869212 -0.06668 0.869212
0.035127 0.579047 0.035127 0.579047

1. ln Q = ln A + ln K + ln L

ln Q = 4.199536+ 0.401266ln L + 0.307087ln K

similarly as defined in the previous question, the value of A can be calculated by the algorithm
of 4.199, and the values of and are 0.307 and 0.401
cobb-douglas Equation
Q= 66.6L0.401K0.307
Here we calculated the value of coefficient of determination which we got equal to 0.985 which
is 98.5% which tells that 98.5% change can be explained by the labor and the capital.
If we calculate the value of t than the value of L=2.02 and the value of k=2.67. if we search the
value of t from table on 7 degree of freedom than its 2.36, here we can say that capital is
significant while the labor is not and it doesnt have any significant impact on quantity produced.
There is decreasing return to scale because the value of + is equal to 0.71 and it is less than 1.
MPL =66.6 x 0.401 L0.401 -1 K0.307
=26.7 L0.599K0.307

MPK= 66.6 x 0.307 L0.401 K0.307-1

= 20.4L0.401 K0.693
b.
K=

it is the equation for expansion path

where wage rate is Rs. 20, and Rs.15

Which is k=
Q= 66.6L0.401K0.307

(i)

Here we will substitute the value of K and we know that the value of Q is 200.
Q= 66.6(
200= 66.6(

) 0.307L0.401
) 0.307L0.401

Where L * = 4.17
And putting L * in (i)
Will give K* =5.56

6-23
Regression Statistics
Multiple R
0.991199
R Square
0.982476
Adjusted R
Square
0.979555
Standard
Error
0.08098
Observations
15
ANOVA
df
2
12
14

SS
MS
F
4.411837 2.205918 336.3792
0.078694 0.006558
4.490531

Coefficients
-8.38241
0.674366
1.179405

Standard
Error
t Stat
P-value
2.715808 -3.08652 0.009423
0.153036 4.406577 0.000855
0.301825 3.907575 0.002081

Regression
Residual
Total

Intercept
L
K

Significance
F
2.9E-11

Upper
Lower
Upper
Lower 95%
95%
95.0%
95.0%
-14.2996 -2.46517 -14.2996 -2.46517
0.340929 1.007803 0.340929 1.007803
0.521784 1.837025 0.521784 1.837025

1. ln GNP = ln A + ln K + ln L

ln GNP = -8.38241 + 0.674366 ln L + 1.179405 ln K

0.674366 and 1.179405 are the value of and and the value A can be known from the
algorithm of 0.000229.
cobb-douglas Equation

GNP = 0.000229K1.179405L0.674366
If we find the tabulated value of t and the level of significance is 5% than it will be 2.17, now,
we can say that the values of L and K both are significant because both are greater than the
tabulated value. The R square is 98.24 % tells that the 98.24% of the variation can be explained
by the Labor and capital. + = 1.853 which tells that there is an increase in return to scale
because it is greater than 1. There will be greater than 1percent increase in the outcome if the
input is increased by 1%.