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multiple regression

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.