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Application of Linear Regression

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The management of a chain of fast food restaurants wants to investigate the relationship between the daily sales volume (in dollars) of a company restaurant and the number of competitor restaurants within a 1 mile radius. The following data have been collected:

Number of competitors within 1 mile Sales
1 3600
1 3300
2 3100
3 2900
3 2700
4 2500
5 2300
5 2000

a) Develop the least-square estimated regression equation that relates daily sales volume to the number of competitor's restaurants within a 1 mile radius.
b) Use the estimated regression equation developed in part (a) to forecast the daily sales volume for a particular company restaurant that has four competitors within a 1 mile radius.

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Solution Summary

We use linear regression to predict daily restaurant sales based on the number of competitors.

Solution Preview

a) The equation of the least-squares fit line is , where
and ...

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