Question: Once again using the data relating restaurant sales and the number of competitors within one mile:

Let's derive the regression equation relating sales level and the number of competitors.

The regression equation is given by:

y = a + bx

where:

b = r * (s _y / s _x )

(we derived the three values on the right of the equation in the first DQ)

a = ybar – (b * xbar), where ybar is the mean value of y, and xbar is the mean value of x – values we also derived in the first DQ

Again, let's do this as a group exercise, step by step, with 'one part per customer:'

1. why is it appropriate that sales is the dependent variable (y) while # of local competitors is the independent variable (x)?
2. what does the parameter b in the regression equation equal?
3. what does the parameter a in the regression equation equal
4. interpret what the regression equation means.
5. what sales level would we predict when there are four competitors within one mile, using the regression equation?

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Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document