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ECON 5705 Chapter 4 Brendan O’Neal

ECON 5705 Chapter 4 Brendan O’Neal -...

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Brendan O’Neal ECON 5705 Chapter 4 Exercises 1-4 Exercises 1. a. Y = 390.376 – 14.263X2 b. The intercept (390.376) tells us that the sales will be 390,376 gallons when selling price is 0. This is a selling price that is far lower than estimated on the regression line ($0 per gallon vs $12.00 per gallon). The estimate has no practical significance, because of the essential lack of selling price. The estimated slope (-14.263) tells us that the expected sales will decrease by 14,263 gallons per dollar increase in sale price. c. B2 = 14.263 Sb2 – 2.909 t = (-14.263 – 0)/2.909) = -4.903 We reject the null hypothesis at the .05 significance level due to the lack of statistically significant relationship between paint sales and the selling price. d. R2 = .75 The equation explains 75% of the variation within the paint sales in the sample. e. F = MSR/MSE = 6489.812/270.024 = 24.034 The F-value that is calculated is greater than the F-value from our table. This would lead us to reject the null at the .05 significance level and illustrates no relationship between the selling price and paint sales.
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