04. Omega Stores model of sales has two independent variables, namely, customer
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Question
04. Omega Stores model of sales has two independent variables, namely, customer spending an of Omega Stores' credit card. An econometrician conduc following results shown in the following equation. Note the p-values are reported underneath each estimated coefficient. ted a study for this company and reported the + 25. Omega Stores' credit card usage (0.079) Sales = 200 + 40"customer spending p-value (0.000) (0.008) R-square- 0.97 F-stat- 108.00 p-value-0.015 Provide the accurate interpretation of each estimated coefficient presented in the model above a. b. Discuss the significance of each estimated coefficient of the model above. c. Discuss the predicting power of the model above using the appropriate statistic. d. What is your overall assessment of this model based results presented above.Explanation / Answer
Answer to the question is as follows:
a. Accurate interpretation of each estimated coefficient is :
Est. Sales increases by 40 units, if customer spending increases by 1 unit
Est. Sales increases by 25 units , if Omegastore credit card usage increases by 1 unit
b.Customer spending has a p-value of .008, it' statistically significant
The interaction variable Omegastorecredit usage is not , as it' p-value is more than .05
c.We will use the 1st peice of info to answer this question.
The Rsquare is at .970 which means a near to perfect predictive power of the regression, it means a strong predictive power with a good fit
A p-value of .0015 from the 2nd table means that regression equation is significant
d. Overall assessment of the model:
1. It has a strong predictive power - weknow this because Rsquare is near perfect
2. The variables are statistically significant, and therefore we can use this linear equation for prediction of Sales
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