MANAGERIAL ECONOMICS PROJECT

SUBMITTED BY:
NATASHA SAHER
SUBMITTED TO: SIR AHSAN RIZVI

CLASS: BBA-5G
Acknowledgements

In the name of ALMIGHTY ALLAH the most beneficent and the most merciful.
First of all I thank to ALMIGHTY ALLAH who enabled me the capability, power,
opportunity and intelligence to conduct the study.

I am thankful to acknowledge the constant guidance and encouragement by

supervisor, SIR AHSAN RIZVI. He made the course a valuable learning
experience for all of us and made us grow as learned individuals. We will always
be in debt for his affectionate attitude. We are also grateful to BAHRIA
UNIVERSITY, which helps students to engage in extra – curricular activities to
enhance their experiences.

Hopefully this report will serve a good purpose.

Thank you
 DATA ANALYSIS DESCRIPTION

The data is collected from the energy sector. The purpose of this data collection is
to study the relationship that how crude oil extraction and gas supply plays a
crucial role in electricity (installed capacity). The data is collected from a renown
website of Pakistan

Here the dependent variable is Y which is ELECTRICITY (INSTALLED

CAPACITY) and its unit is THOUSANDS MEGAWATT. X1 represents the CRUDE
OIL EXTRACTION and its unit is MILLION BARRELS. X2 represents the GAS
SUPPLY and its unit is BILLION CUBIC FEET.

Thus:

Y = electricity (installed capacity).

X1 = crude oil extraction.

X2 = gas supply.

MUTIPLE REGRESSION EQUATION

Y^ = bo + b1x1 + b2x2

EQUATION: Y^ = -0.846+ 0.363 X1 + 0.009 X2

CALCULATION OF DATA

Adjusted R Std. Error of Durbin-

Model R R Square Square the Estimate Watson
1 .909a .827 .806 2.31460 .256

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
(Constant) -.846 2.188 -.387 .704
crude oil .363 .148 .365 2.458 .025
gas .009 .002 .607 4.084 .001

Sum of Mean
Model Squares df Square F Sig.
Regressio
434.159 2 217.080 40.520 .000a
n
Residual 91.075 17 5.357
Total 525.234 19
 REGRESSION STATISTICS

bo -0.846
b1 0.363
b2 0.009
R Square 0.827
Adjusted R Square 0.806
Observations 20

R SQUARE INTERPRETATION:
It means that variation in the crude oil extraction and gas supply explains 82.7 %
of the variation in electricity (installed capacity).
 Hypothesis testing
T1:
Ho: b1 = 0

HA: b1 ≠ 0

tα , n-k

t0.05, 20-3

With the help of t distribution table we find the value of t which is given below:

t0.05, 17 = 2.110.

Through the available data we calculate t1 which is given below:

t1 = 2.458

Result:

Ho rejected.

INTERPRETATION:
Ho is rejected which means that b1 is statistically significant. As Y is dependent
variable (electricity installed capacity) and X1 is an independent variable (crude oil
extraction).
T2:

Ho: b2 = 0

HA: b2 ≠ 0

tα , n-k

t0.05, 20-3

With the help of t distribution table we find the value of t which is given below:

t0.05, 17 = 2.110.

Through the available data we calculate t1 which is given below:

t2 = 4.084

Result:

Ho rejected.

INTERPRETATION:
Ho is rejected which means b2 is statistically significant. As Y is dependent variable
(electricity installed capacity) and X2 is an independent variable (gas supply).

F-test
FORMULA:

F= R2 / (k-1) / (1- R2) / (n-k)

Ho: b1 = b2 = 0

HA: b1 = b2 ≠ 0

Through table, we find that values of F 3.59.

Through calculation of the above data we calculate:

F = 40.520

Result:

Ho rejected.

INTERPRETATION:
HO is rejected and HA is accepted which shows that collective parameters are
significant and all coefficients are not equal to zero.

Summary
 The purpose of this report is to study the relationship that how crude oil extraction and gas
supply plays a crucial role in electricity (installed capacity). Since we are interested in doing
multiple regression of this data so we considered three variables X1, X2 and Y. Y represents the
electricity (installed capacity) while X1 represents the crude oil extraction and X2 represents the
gas supply. In the regression statistics of this data the calculated value of R2 is 0.824 and the
value of adjusted R2 is 0.806. Total number of observation considered is 20. In hypothesis testing
(t-test) we conclude that both parameters are statistically different from zero at the 5 percent
level of significance. In F-test, we conclude that collective parameters are significant and X1 and
X2 are independent and that there is no statistically significant relationship between the
independent and dependent variables which means that all coefficients are not equal to zero.

DATA:
 s.no Years DEPENDENT INDEPENDENT
VARIABLE VARIABLES
Y = ELECTRICITY X1 = CRUDE OIL X2 = GAS
( INSTALLED CAPACITY ) EXTRACTION SUPPLY
000 MEGAWATT MILLION BARRELS BILLION
CUBIC FEET
1. 1988-1989 1.30 2.80 165.40
2. 1989-1990 3.10 10.90 385.20
3. 1990-1991 12.90 26.10 908.00
4. 1991-1992 9.36 22.46 550.71
5. 1992-1993 10.586 21.89 583.54
6. 1993-1994 11.319 20.67 624.22
7. 1994-1995 12.10 19.90 628.20
8. 1995-1996 13.00 21.10 666.60
9. 1996-1997 14.70 21.30 697.60
10. 1997-1998 15.60 20.50 699.70
11. 1998-1999 15.60 19.70 744.90
12. 1999-2000 17.40 20.40 818.30
13. 2000-2001 17.50 21.00 857.40
14. 2001-2002 17.70 23.20 923.80
15. 2002-2003 17.80 23.50 992.60
16. 2003-2004 19.20 22.60 1202.70
17. 2004-2005 19.40 24.10 1344.90
18. 2005-2006 19.40 23.90 1400.00
19. 2006-2007 19.40 24.60 1413.60
20. 2007-2008 19.40 25.60 1454.20

REFERENCE:
http://www.finance.gov.pk/survey/chapter_10/13_Energy.pdf