Question: Enterprise Industries produces Fresh, a brand of liquid laundry detergent. In order to more effectively manage its inventory and make revenue projections, the company would like to better predict demand for Fresh. To develop a prediction model, the company has gathered data concerning demand for Fresh over the last 30 sales periods. The demand data is reported in “DNSC202_HW07_Q1.xls”. The following are the variables given in the data set:

y = demand for the large size bottle of Fresh (in hundreds of bottles) in a given sales period

x1 = the price (in dollars) of Fresh as offered by Enterprise Industries in a given sales period

x2 = the average industry price (in dollars) of competitors’ similar detergents in the sales period

x3 = Enterprise Industries” advertising expenditure (in hundreds of thousands of dollars) to promote Fresh in the sales period

a.) Identify your independent and dependent variables.

b.) Plot a scatter diagram of each pair. Do you think it is reasonable to use the least squares regression method. Why or why not?

c.) Use the least squares method to find the regression equation. Please report your regression output in your write-up. Also write down your regression equation. What are the assumptions that you are making here?

d.) Interpret the meanings of b0 , b 1 , b2, b3

e.) At the 0.05 level of significance, which of the independent variables have significant effects?

f.) Determine the standard error of the estimate.

g.) How much of the total variation is explained by your regression model? Please show how you would calculate this value.

h.) Obtain the adjusted coefficient of determination and show how it is calculated.

h.) What would be the correlation between Y and X1? Y and X2? Y and X3? Please show how they are obtained.

i.)What would be your best estimate of the demand for Fresh when the price of Fresh is $ 3, the price of the competitors’ is $3.5 and the advertising expenses for Fresh spent by Enterprise Industries is $900,000?

j.) Using a 0.05 level of significance, do you think that at least one of the independent variables provide any explanatory power in predicting the demand for Fresh? Please state your hypothesis clearly (both verbally and symbolically). Also briefly explain the testing procedure (namely what type of test you are using and why you are using it).