Question

The following simple bivariate linear regression model was estimated explaining a firm's sales revenue to the income of its customer’s (INC) using annual data over a nine-year period:

Sales Revenue = 81.38 + .23(INC),

(0.018) p-vale = 0.001

where the standard error of the slope estimate is reported in parentheses below the coefficient estimate

a) Interpret the value of the intercept term and the slope term in the fitted regression equation.

b) Is the coefficient on the income variable statistically significant?

c) What level of sales would you forecast if income were $4,200?

Answer 1

A) In the given regression equation, 0.23 is the slope of the regression line with respect to the sales revenue of the firm. The slope indicated the percentage change in the sales revenue fue to the change in the customer's income.

81.38 is the intercept invthe regression equation. The intercept shows the amount of sales revenue when the income is zero.

B) The p value shows the relationship established in the regression equation exists for the population or not. Since the p value here is 0.001, it is significant at 1% significance level.

C) If the income level is 4200$, then the sales revenue would be

Sale revenue= 81.36+0.23(4200)

=81.36 + 966

= 1047.36 $