Management 6005 takehome quiz 6

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Mohammad Yahya Aladalh Management 6005 – Mohammad Yahya Aladalh Take-home Quiz 6 – Honor code applies: Do not talk to your classmates 1. Evaluate each of the following statements: a. ‘’In a multiple regression model, the coefficients on the explanatory variables measure the percent of the total variation in the dependent variable Y explained by that explanatory variable.’’ First of all, it is obvious that unit demand which is the dependent variable Y, is assumed to change with changes in each independent variable. However, the coefficient of determination or R 2 , shows how well a multiple regression model explains changes in the value of the dependent Y variable. If the R 2 equals 0, then the coefficients and the model sometimes provide no explanation of the variation in the dependent variable, but if it equals 1.0, then all the variation is explained by the independent variables. Another example, if the coefficient of determination for the regression model is 85, then 85 percent of the total variation of the unit sales can be explained by the underlying variation in the independent variable; therefore, a relatively high level of explanatory power id realized. Moreover, if R 2 is 0, then the regression model can not explain an variation in the dependent Y variable even though it is seldom that coefficient of determination equals 0. In addition, the type of analysis and anticipated use of statistical results must be considered. For example, demand and cost analysis over time will lead to higher levels for coefficient of determination than would a similar analysis across firms at a given time. This is

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