Question

Hiroshi Sato, an owner of a sushi restaurant in San Francisco, has been following an aggressive marketing campaign to thwart the effect of rising unemployment rates on business. He used monthly data on sales ($1,000s), advertising costs ($), and the unemployment rate (%) from January 2008 to May 2009 to estimate the following sample regression equation: Salesˆt = 12.43 + 0.02Advertising Costst−1 − 0.52Unemployment Ratet−1. a. Hiroshi had budgeted $540 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 8%. (Enter your answer in dollars not in thousands.) Salesˆt $ 23.22 23.22 Incorrect b. What will be the forecast if he raises his advertisement budget to $640? (Enter your answer in dollars not in thousands.) Salesˆt $ 21.07 21.07 Incorrect c. Reevaluate the above forecasts if the unemployment rate was 8.6% in May 2009. (Enter your answers in dollars not in thousands.) Advertising Salesˆ t 540 $ 31.96 31.96 Incorrect 640 $ 20.75 20.75 Incorrect

Answer 1

Answer:

Given Data

We have information about the monthly data on sales , advertising cost and unemployment rate from January 2008 to May 2009

The sample regression equation:

a). Hiroshi had budgeted $540 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 8%.

The forecast for sales for june 2009 is :

= 12.43 + 0.02(540)-0.52(8)

= 19.07

If Hiroshi  advertisement budget to $ 540The forecast for sales for June 2009 is 19.07.

b. What will be the forecast if he raises his advertisement budget to $640.

= 12.43 +0.02(640) -0.52(8)

= 21.07

If Hiroshi  advertisement budget to $ 640 , The forecast for sales for June 2009 is 21.07

c). Reevaluate the above forecasts if the unemployment rate was 8.6% in May 2009.

If Hiroshi  unemployment rate was 8.6%, the forecast for sales for June 2009 is:

= 12.43 +0.02(540) - 0.52(8.6)

= 18.758

If Hiroshi  unemployment rate was 8.6%, the forecast for sales for June 2009 is: 18.758