Question 4: Multiple Regression Problem (Chapters. 15) The manager of Showtime M

Question

Question 4: Multiple Regression Problem (Chapters. 15) The manager of Showtime Movie Theaters Inc, Boardman, would like to estimate the effects of advertising expenditures on weekly gross revenue using regression analysis. The manager hires you to do the analysis for her. The following historical data for a sample of eight weeks are given to you Weekly Gross Weekly TV Advertising Revenue ($1000s) Weekly Newspaper Adv. 96 90 95 92 95 94 94 94 ($1000s) 5.0 2.0 4.0 2.5 3.0 3.5 2.5 3.0 ($1000s) 1.5 2.0 1.5 2.5 3.3 2.3 4.2 2.5 Note: Please attach Exeel output with complete results Ia. Explain to the managers the causal relationship between Weekly Gross Sales, TV Advertising and Newspaper Advertising. In your statement identify the DV (call it Y) and the IVs (call them X, and X2, respectively). b. Formulate a multiple LRM that relates Y to X, and X c. What are your expected signs of the regression parameters? 2a. Use Excel to estimate the model that you have specified in part 1b above b. Are the estimated signs consistent with you expectation on the basis of theory? Please be specific. 3. Use the results in your Excel output to answer these questions a. Interpret the coefficient of determination estimate in the context of this problem. b. Interpret the meaning of the estimates for 'a', "bi and 'b c. Is the multiple LRM you formulated in part lb statistically significant? Verify at 5% level of significance d. Suppose the owner plans to spend $3000 a week on TV advertising and $1800 a week on newspaper advertising, how much should the owner expect to gross in revenue for a week (etusing md) using the multiple regression model? e. Which medium of advertising is relatively more important in predicting gross revenue and why?

Explanation / Answer

2
a)based on the regression output

we form the regression equation using the coefficients as

Y = 83.23 + 2.29*X1 + 1.3*X2

for every unit dollar spend on tv advertsing the revenue increases by 2.29 units

for every unit dollar spend on newspaper advertsing the revenue increases by 1.3 units

This also tells us that tv advertising is more effective to increase revenue

b)

both the coefficients are positive , this means that when we increase advertising the revenue also increases. This is consistent with the theoritical understanding , when we increase or spend more on advertising a product , the sales increases as the customer reach is increased , as reach increases the sales and henceforth revenue also increases

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