In: Economics
(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.