Suppose you are presented with the following regression equation involving health care expenditures and its determinants, where all of the variables have been defined previously.

Suppose you are presented with the following regression equation involving health care expenditures and its determinants, where all of the variables have been defined previously.

E 5 500 2 25P 1 0.20Y 2 1.2A R2 5 0.30

11.212 12.452 10.432 14.132 N 5 1,000

a. What percent of the variation in health care spending is explained by the various independent variables?

b. Which of the independent variable possess a statistical significant impact on health care spending? What do the results suggest about the relation between income and health care spending?

c. Supposing that both P and E are measured in dollars, interpret the coefficient estimate on P.

d. What does the coefficient estimate on A suggest about the relation between age and health care spending?

e. Can you think of any omitted variables that might cause our estimates to be suspect?

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