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    Qty. Price Advertise Distance
    180 475 1100 120
    590 400 2400 65
    430 450 1500 50
    250 550 3100 75
    275 575 3400 45
    720 375 2200 20
    660 375 1200 50
    490 450 2400 75
    700 400 2200 45
    210 500 1000 55

    A firm's marketing dept. obtained data from 10 of the firm's outlets. The data consists of the qty. and price of the products sold at each outlet from the distribution center. Using the data assume the underlying demand relationship is linear function of price. Run a regression to obtain the least squares estimate of the demand (make sure you include the constant term). Provide a detailed economic interpretation of the regression outputs, including an estimate of the optimal price that each regression generates. Which regression is recommended for forecasting future sales and price?

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    Solution Preview

    Please see the attached files.

    The first thing we should always do is to set up scatter diagrams and investigate the associated correlation. The Scatterplot function can be easily generated using the Chart procedure in Excel. We can do this under Chart menu.

    After copying the date, paste them into the Excel file, which I have created. You then select the whole area. Go to the Chart Wizard icon, select Scatter diagram, and the end result is presented in the 4 charts. In each of these charts, I've used the function fit trendline to estimate the ...

    Solution Summary

    Insight is given about multiple regression.