Question

In: Economics

(1)A local entertainment establishment, in a small town, is trying to decide whether it should increase...

(1)A local entertainment establishment, in a small town, is trying to decide whether
it should increase its weekly advertising expenditure on a campus radio station. The
last six weeks of data on monthly revenue and radio advertising expenditure are
shown in the table below:
Week 1 2 3 4 5 6
Revenue ($000) 3.0 4.0 2.0 4.0 7.0 3.0
Advertising Expenditure ($00) 2.0 3.0 0.0 6.0 8.0 4.0
(a)Write a regression model that relates both variables in the “general” and
“specific” forms and briefly explain why the “specific” form is preferred.
(b) Estimate the parameters of the model and present your results in standard form.
Provide an interpretation of the results.
(c)Assume that in the following week #7, the firm planned to increase its advertising
expenditure to 9 (hundred) comment, briefly, on the expected impact of this new
spending on the firm’s total revenue according to this model.

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