In: Economics
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)?