Consider the model given below:
Yi = B1 + B2 D2i + B3D3i + ui
Where Yi = Average consumption expenditure per person per 30 days in state i
D2i = 1 if the state is in the eastern region of India
0 if otherwise (i.e, in the other region of the country)
D3i = 1 if the state is in the north west-central region of the country
= 0 otherwise (i.e, in the other region of the country)
Answer the following questions:
a) What kind of explanatory variables are mentioned in the model? Is the model mentioned above
same as multiple regression model?
Considering the same kind of model as above. You obtain the data for 17 states in India for 2006-
07. These 17 states are classified into three geographical regions of the country. 1) East (6 states)
2) North west-central ( 7 states), 3) south ( 4 states). You ran the regression and obtained the
following results:
Yi = 1097.38 – 241.04D2i – 30.09 D3i
Se = (103.31) (133.37) (129.50)
T = (10.62) (-1.81) (-0.23)
P value = (0.00)

(0.09) (0.82)

b) Interpret the regression coefficients in the above model.
c) Test the significance of these coefficients

d) Calculate the mean per capita consumption in the south, eastern, and northwest central