In: Economics

# You work for SneauxCeauxne, the Cajun-inspired crushed-ice dessert company. You’ve collected data on monthly sales (S,...

You work for SneauxCeauxne, the Cajun-inspired crushed-ice dessert company. You’ve collected data on monthly sales (S, number of snow-cones per month) and the price of your regular-size snow-cone (P, in dollars), as well as the daily average summer temperature in your most popular market (T, in degrees Fahrenheit). You estimate the following regression model: S = a + bP + cT. In your regressions, you usually look for a 10%-or-better level of confidence.

a.   What signs do you expect for a, b, and c?

b.   Your regression yields the following results:

 Adjusted R Square 0.883 Independent Variables Coefficients Standard Error t Stat P-value Intercept 2718 598 4.544 0.00615 P -641.62 90.23 -7.111 0.00085 T 10.32 6.36 1.623 0.16562

Interpret what these coefficients mean.

c.   Does price have a statistically significant effect on sales?

d.   Does average temperature have a statistically significant effect on sales?

e.   What portion of the total variation in sales remains unexplained?

f.    SneauxCeauxne is considering selling in a new city, where the average daily summer temperature is 83°, for a price of its regular size snow-cone of \$4.10. What level of sales would you expect in this new city (rounded to the nearest dollar)?

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