Question

Think of the example of store traffic and advertising dollars in class. What will be the store traffic if you use $200 ad budget in the following prediction equations:

1.   150+0.52(ad_budget)
2.   150+0.37(ad_budget)
3.   150+0.62(ad_budget)
4.   150-0.05(ad_budget)
5.   150-0.02(ad_budget)

Think of the example of newspaper, radio, and TV regression in class. Imagine that newspapers is the base case dummy variable. What will be the store traffic for using radio only and using TV only in the following prediction equations:

1.   700+150(Radio)+200(TV)
2.   250+500(Radio)+700(TV)
3.   600-50(Radio)+100(TV)
4.   550-75(Radio)-125(TV)
5.   250-65(Radio)+65(TV)

Answer 1

Answer 1

We want to know the store traffic when the ad budget is $200. We will set ad budget = $200 in each equation and calculate store traffic

1.   150+0.52(ad_budget)

=150+0.52*200

= 150 + 104

= $254

2.   150+0.37(ad_budget)

=150+0.37(200)

= 150 + 74

= $224

3.   150+0.62(ad_budget)

= 150 + 0.62*(200)

= 150 + 124

= $274

4.   150-0.05(ad_budget)

= 150 - 0.05(200)

= 150 - 10

= $140

5.   150-0.02(ad_budget)

= 150 - 0.02*(200)

= 150 - 4

= $146

Answer 2

In case of dummy variables, we use only 1 and 0 to show the required value for y or dependent variable.

To calculate store traffic using radio only, then put radio = 1 and Tv = 0 in each equation

1.   700+150(Radio)+200(TV)

= 700+150(1)+200(0)

= 700 + 150 + 0

= $850

2.   250+500(Radio)+700(TV)

=250+500(1)+700(0)

= 250 + 500 + 0

= $750

3.   600-50(Radio)+100(TV)

=600-50(1)+100(0)

= 600 - 50 + 0

= $550

4.   550-75(Radio)-125(TV)

= 550-75(1)-125(0)

= 550-75 -0

= $475

5.   250-65(Radio)+65(TV)

=250-65(1)+65(0)

= 250 - 65 + 0

= $185

To calculate store traffic using TV only, then put radio = 0 and Tv = 1 in each equation

1.   700+150(Radio)+200(TV)

= 700+150(0)+200(1)

= 700 + 0 + 200

= $900

2.   250+500(Radio)+700(TV)

=250+500(0)+700(1)

= 250 + 0 + 700

= $950

3.   600-50(Radio)+100(TV)

=600-50(0)+100(1)

= 600 - 0 + 100

= $700

4.   550-75(Radio)-125(TV)

= 550-75(0)-125(1)

= 550-0 - 125

= $425

5.   250-65(Radio)+65(TV)

=250-65(0)+65(1)

= 250 - 0 + 65

= $315