Your Task Is to Estimate the Ice Cream Sales for a Certain

question 47

Essay

Your task is to estimate the ice cream sales for a certain chain in New England. The company makes available to you quarterly ice cream sales (Y)and informs you that the price per gallon has approximately remained constant over the sample period. You gather information on average daily temperatures (X)during these quarters and regress Y on X, adding seasonal binary variables for spring, summer, and fall. These variables are constructed as follows: DSpring takes on a value of 1 during the spring and is zero otherwise, DSummer takes on a value of 1 during the summer, etc. Specify three regression functions where the following conditions hold: the relationship between Y and X is (i)forced to be the same for each quarter; (ii)allowed to have different intercepts each season; (iii)allowed to have varying slopes and intercepts each season. Sketch the difference between (i)and (ii). How would you test which model fits the data the best?

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Definitions:

Legal Obligations

Duties enforced by law that an individual or organization is required to fulfill.

Ethical Responsibility

The obligation to act in a manner that is considered morally right and beneficial to society, often guiding business practices.

Philanthropic Goodwill

The positive recognition and reputation a business gains through charitable activities and contributions to society.

Social Responsibility Pyramid

A concept that businesses are accountable to society and should act in a manner that benefits society at large, beyond their own interests.