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Multiple Regression Analysis : An Example

Problem:
The demand for airplane passengers (Y) is a function of a average fare (X1), the fare of the competing airline, and the annual per capital income of the passengers(X3)

Passenger seat sold Fare of the Fare of the competing Annual Per Capital
of the airline airline airline Income of passenger
648 250 250 $105
336 265 250 102
378 265 240 103
333 230 240 105
112 225 240 100
137 225 260 96
109 220 250 93
98 230 240 95
60 235 240 95
83 245 250 97
91 240 250 99
105 250 240 102
76 240 220 105
92 235 250 108
113 235 230 110
102 240 240 109

Questions:
1. Find the demand for passenger seat (Y) as a function of the fare of the airline(X1), the fare f the competing airline (X2), and the annual per capital income of passengers (X3).
2. Graph the actual and the estimated Y and assess the goodness of fit.
3. State the effects of each of the independent variable on the demand for passengers.
4. State the significance or non significance of each of the independent variables.
5. If the fare of the airline increases to $300 (X1=300), the fare of the competing airline is $200 (X2=$200) and the annual income is (X3=$120), find how many tickets will the airline sell?

Solution Summary

In the present problem an example for multiple regression analysis has been worked out. The general procedure for implementing multiple regression analysis by using regression analysis tool of M S Excel is provided. Explanations are given, for how to interpret the estimated regression parameters such as the regression coefficients, coefficient of determination etc. The excel sheet in which the example is worked out is also provided as an attachment.

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