Question

Enterprise Industries produces Fresh, a liquid laundry detergent product. In order to study the relationship between price and sales of Fresh, the company has gathered data concerning demand for Fresh over the last 30 sales periods (each sales period is four weeks). The data can be found Fresh.xlsx. Here is the explanation of each variable: Period: the index of 30 sales period (Period = 1, 2, …, 30) Sales: the sales volume (in hundreds of thousands of bottles) of Fresh in the sales period. For example, the sales volume of Fresh in Period 1 is 7.38×100,000 (bottles)=738,000 bottles. Price: the price paid for a bottle of Fresh in the sales period. For example, $3.85 in Period 1 means that consumers paid $3.85 to purchase a bottle of Fresh in Period 1. Ind Price: the average industry price (in dollars) of competitors’ similar detergents in the sales period. For example, $3.80 of IndPrice in Period 1 means that consumers paid $3.80 on average to purchase a bottle of a competitor’s similar detergent product in Period 1.

2-1) Enterprise Industries wants to know how the price of Fresh (Price) is related to its sales volume (Sales). Do a regression analysis to examine how Sales is related to Price. Copy and paste the regression result from Excel and write the estimated regression model. (16 points)

2-2) Enterprise Industries wants to know how the competitors’ average price (IndPrice) is related to the sales of Fresh. Do the regression analysis to examine how the competitors’ average price is related to the sales of Fresh. Copy and paste the regression results from Excel and write the estimated regression model. (16 points)

2-3) Enterprise Industries wants to know how the Price of Fresh (Price) and the industry average price (IndPrice) are jointly related to the sales of Fresh. Do a regression analysis to examine how the two variables are jointly related to the sales volume of Fresh. Copy and paste the Excel results and write the estimated regression model. (18 points)

Answer 1

solution:

2-1)

The regression analysis is shown below. The data is between sales to price. The estimated regression model is y = 21.62 – 3.54x. Here x = price and y = sales

2-2)

The regression analysis for IndPrice to sales is shown below. The estimated regression model is y = 2.33x – 0.84

2-3)

The regression analysis for both the independent variable (IndPrice and Price) on dependent variable (Sales) is shown below. The regression model is y = 13.6 – 4x1 + 2.46x2. Here y = sales, x1 = Price and x2 = IndPrice