DSE 2012 Question 32: Goodness of fit and model selection

An analyst trying to estimate the demand for rice has estimated the following two models. Model 1: $D=50+0.3Y+0.1P+12N;\ R^{2}=0.7$, where $D$ is the demand for rice per household, $Y$ is income per household, $P$ is the price of rice and $N$ is household size. The standard errors associated with the coefficient $Y$ is 0.1, that associated with $P$ is 0.05, and of $N$ is 3. Model 2: $D/N=50+0.2Y/N-0.5P;\ R^{2}=0.9$, where the standard errors of the estimated slope coefficients are 0.1 and 0.2 respectively. Which of the following statements is true?