Advertising expenditures and sales for the last 5 quarters have been as follows: Quarter Advertising expenditures...

Advertising expenditures and sales for the last 5 quarters have been as follows:

Quarter	Advertising expenditures	Sales
1	1	4
2	1	5
3	2	6
4	2	7
5	4	8

In quarter 3, a new product was introduced that would influence sales in quarter 3. 4 and 5. The following model is established:

y=β₁x₁+β₂x₂+ ε

where y=sales, x₁=advertising expenditures, x₂ is a variable that is 1 when the new product is available and 0 otherwise, and ε is an error component. Find the least squares estimate of β_1.

Solutions

Expert Solution

Step 1 : put the data in excel.

Step 2 : Go to data tab, select data analysis and click on regression

Step 3 : Update the values as shown.

Step 4 : The output will be provided as follows.

Regression

Sales = 3.75 +0.75 (Advertising expenditures) + 1.25 (New product)

beta coefficient for advertising = 0.75

milcah answered 1 month ago

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