Imagine you are a pizza company trying to figure out what factors influence the market demand for your pizza. The quantity demand for pizza (dependent variable) is determined from the following four independent variables: Your selling price for pizza, your competitor’s selling price, advertising expenditures and the local income per household.
1) Using the attached data set in Excel, determine the estimated regression equation with the four explanatory (independent) variables shown.
2) Determine the standard error for the model.
3) Calculate the coefficient of determination for the model. What does this value mean?
4) Calculate the correlation coefficient (r) for this model. If n=30, Test following hypothesis:
Ho: ?=0 at the .05 level.
Do we reject or fail to reject the null?
5) Give an economic interpretation of the sign (negative or positive) of the estimated regression coefficients. For example: Is the competitors selling price directly (positively) related to the quantity demand for pizza, or inversely (negatively) related?
6) Which of the independent variables (if any) is statistically significant at the .05 level in explaining selling price? Note: degrees of freedom =25 in this model.
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