Multiple Regression
For this assignment, you may find it helpful to review the Youtube video that is attached in the word document. Excel will be needed for this assignment. Show all your work.
Let Yt be the sales during month t (in thousands of dollars) for a photography studio. Let Pt be the price charged for the portraits during month t. The data will be in the file named week 4 assignment chapter 12 problem that is attached. Use regression to fit the following model to these data:
Yt = a + b1Yt−1 + b2Pt + et
This equation indicates that last month’s sales and the current month’s price are explanatory variables. The last term, et, is an error term.
For your assignment, complete the following:
Part A: If the price of a portrait during Month 21 is $10, what would you predict for sales in Month 21?
Part B: Does there appear to be a problem with autocorrelation of the residual? Explain your answer.
In your Excel spreadsheet,
Utilize the regression model.
Utilize the support tool of Excel.
Predict sales as described in Part A.
Explain any problem as described in Part B
