Consider the regression model 

Yi =  + βX_i + U_i

where Y is the quantity demanded of bread and X is the price of butter, and U_i is a random term that is distributed normally with mean zero and unknown variance  . A sample of 20 observations yields the u following information :

(i) Set up the null arid alternative hypotheses to test if the price of butter as a determinant of the quantity demanded of bread is significant. 

(ii) How would you test your hypotheses ?

[Given that t_{0.05; 18} = 1·734,

t_{0.01; 18} = 2·552,         t_{0.025; 18} = 2·101 

and t_{0.005; 18} = 2·878, where 0·025 =            (7 Marks) ( 120 words)