GSM 5000 MANAGERIAL ECONOMICSINDIVIDUAL ASSIGNMENT(To be sumbitted in Week 7)

The Economic Planning Unit (EPU) of Prime Ministers Department, Malaysia is interested in developing a production function for primary metal industry. The data from 27 different industries were collected and presented in the following Table.ObservationValue AddedLabourCapital

(Output)InputInput

QLABOURCAPITAL

1657.29162.31279.99

2935.93214.43542.50

31110.65186.44721.51

41200.89245.831167.68

51052.68211.40811.77

63406.02690.614558.02

72427.89452.793069.91

84257.46714.205585.01

91625.19320.541618.75

101272.05253.171562.08

111004.45236.44662.04

12598.87140.73875.37

13853.10145.041696.98

141165.63240.271078.79

151917.55536.732109.34

169849.171564.8313989.55

171088.27214.62884.24

188095.631083.109119.70

193175.39521.745686.99

201653.38304.851701.06

215159.31835.695206.36

223378.40284.003288.72

23592.85150.77357.32

241601.98259.912031.93

252065.85497.602492.98

262293.87275.201711.74

27745.67137.00768.59

Average2340.20402.972725.15

The EPU estimate the production function , where Q is the output measured by value added to a particular industry, K and L are capital and labor inputs, respectively, and e is random variable (error term) with zero mean. The EPUs objective is to estimate parameter for, and , which are typically denoted by , and .

Questions

a) Using Excel (Spreadsheet), perform the regression analysis and show your summary outputb) Write the function in linear form (i.e. )c) Test whether the coefficients of capital and labor are statistically significant.d) Determine the percentage of the variation of output that is explained by the regression equation.e) Based on the estimated production function in Table 1, compute the average production of primary metals.f) What is the average output if the industry increase labor input to 500 units and capital input to 4,500 units?

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