problem8S06key

# problem8S06key - Why or why not? 4 + 2(3.6) to 4 2(3.6)...

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Problem Set 8. E303 KEY Davis, Spring, 2006. 1. Bill Smith is the new Director of Marketing at the Jonesfield Ham Company. In the interest of assessing Jonesfield’s pricing policy, Bill examined sales data for the last 24 months, and estimated the following relationship Q = 125 - 14P + 5Ps + 4I (15) (2.8) (3.2) (3.6) R 2 = .71, MSE = 2.75 Where Q number of sugar cured hams sold in the Richmond area per month P price per pound of the hams P s price per point of Smithfield salt-cured country hams I Per capita income (in thousands of dollars.) Assume that at present P = \$3.50; P s = \$5.00, I = \$12 (000). 1. Construct an approximate 95% confidence interval about the price variable. Does this suggest that price is an important explainor of sales? Why or why not? 14 + 2(2.8) to 14 – 2(2.8) 19.6 to 8.4 Yes, price is an important explainor of sales. The interval does not include 0. 2. Construct an approximate 95% confidence interval about the income variable. Does this suggest that income is an important explainor of sales?

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Unformatted text preview: Why or why not? 4 + 2(3.6) to 4 2(3.6) 11.2 to-3.2 No, I cannot conclude that income is an important explainor of sales. The interval includes 0. 3. Assume your answer to 2 was no. Should you eliminate the income variable from your regression? No. Eliminating relevant variables can create bias. 4. Using current values a) forecast sales for the next month. Q = 125 - 14(3.5) + 5(5) + 4(12) = 125 49 + 25 + 48 = 149 b) Provide an approximate 95% confidence band about your projection. 149 + 2(2.75) to 149 2(2.75) 154.5 to 143.5 c) What would tend to make you less confident of your projection? Why? Factors that make the future look different from the past, such as - Independent variable values that deviate from their means- Some probability of a change in the underlying legal or social environment These factors are not included in the estimates...
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## This note was uploaded on 04/12/2010 for the course ECON 303 taught by Professor Shrestha during the Fall '08 term at VCU.

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problem8S06key - Why or why not? 4 + 2(3.6) to 4 2(3.6)...

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