Question

Given the estimated regression equation results for the sale of energy bars (a food item). It is expected that sales of the bars varies depending on which quarter of the year it is.

SALES = 6837 – 532 (PRICE) + 62 (ORGANIC) + 27 Q2 + 35 Q3 – 21 Q4

SALES = number of individual energy bars (not dollars) sold per month

PRICE = price of bars in dollars

ORGANIC = dummy variable: 1 if organic, 0 if not organic

Q2 = dummy variable (second quarter: April, May, June)

Q3 = dummy variable (third quarter: July, August, September)

Q4 = dummy variable (fourth quarter: October, November, December )

(3 pts.) Interpret the coefficient on the PRICE variable.

(3 pts.) Interpret the coefficient on the Q4 dummy variable. (Be as specific as possible)

(3 pts.) Calculate (with a calculator) what SALES would be (how many bars would we sell) if PRICE was $1.50, they are NOT ORGANIC, and we are in the third quarter of the year. SHOW YOUR WORK.

(2 pts.) What changes to this regression would you make (if any) if the p-value on the coefficient of the ORGANIC dummy variable were 0.36? EXPLAIN.

Answer 1

ANSWER::

(a)

Interpret the coefficient on the PRICE variable.?

Ans:: For every additional increase in price, sales will decrease by 532.

(b)

Interpret the coefficient on the Q4 dummy variable. (Be as specific as possible)?

Ans:: When the food is purchased in the fourth quarter, sales will decrease by 21.

(c)

Calculate (with a calculator) what SALES would be (how many bars would we sell) if PRICE was $1.50, they are NOT ORGANIC, and we are in the third quarter of the year. ?

Ans: Sales = 6837 - 532*1.50 +62*0 +35*3 = 6144

(d)

What changes to this regression would you make (if any) if the p-value on the coefficient of the ORGANIC dummy variable were 0.36?

Ans:: The variable would be omitted because the variable is not significnat.

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