The Following Regression Model Has Been Proposed to Predict Sales

question 38

Essay

The following regression model has been proposed to predict sales at a fast food outlet. = 18 - 2x₁ + 7x₂ + 15x₃
where
x₁ = the number of competitors within 1 mile
x₂ = the population within 1 mile (in 1,000s)
x₃ = 1 if drive-up windows are present, 0 otherwise = sales (in $1,000s)
a.What is the interpretation of 15 (the coefficient of x₃) in the regression equation?
b.Predict sales for a store with 2 competitors, a population of 10,000 within one mile, and one drive-up window (give the answer in dollars).
c.Predict sales for the store with 2 competitors, a population of 10,000 within one mile, and no drive-up window (give the answer in dollars).

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Definitions:

Opportunity Cost

The cost of foregoing the next best alternative when making a decision or choosing between options.

Tuition

Tuition refers to the fee paid for instruction or teaching, typically charged by educational institutions such as colleges and universities.

Marginal Cost

The cost incurred from producing one additional unit of a product or service.

Renaissance Fair

A festival that recreates the atmosphere of the European Renaissance with performances, arts, crafts, and food reflective of the time period.