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Simple Linear Regression Case Study

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71 views2 pages

Simple Linear Regression Case Study

Uploaded by

ayafki19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Course Title: Econometrics (BA350)

Lecturers: Fedya Telmoudi &Amira Dridi

Simple Linear Regression


Case Study : Coffee Sales Data
A marketer is interested in the relation between the width of the shelf space for her brand of
coffee (x) and weekly sales (y) of the product in a suburban supermarket (assume the height is
always at eye level). Marketers are well aware of the concept of ‘compulsive purchases’, and
know that the more shelf space their product takes up, the higher the frequency of such
purchases. She believes that in the range of 3 to 9 feet, the mean weekly sales will be linearly
related to the width of the shelf space. Further, among weeks with the same shelf space, she
believes that sales will be normally distributed with unknown standard deviation σ (that is, σ
measures how variable weekly sales are at a given amount of shelf space). Thus, she would like
to fit a model relating weekly sales y to the amount of shelf space x her product receives that
week.
Suppose the marketer conducted the experiment over a twelve week period (4 weeks with 3 feet
of shelf space, 4 weeks with 6 feet, and 4 weeks with 9 feet), and observed the sample data in
the following Table.

1- Find the regression coefficients


2- Find the standard error of the estimate
3- The Durbin-Watson test statistic is 2.33, for 5% significance level and k=1, the dl =0.697
and du=1.023, is there autocorrelation?
4- Following the Normality plot can we say that the normal assumption is validated?
5- Based on the following versus plot, what is your conclusion regarding the homoscedasticity
assumption ?

6- For a 5% significance level, construct a confidence interval for the slope


7- Is there a sufficient evidence that the slope is significant?
8- Referring back to the coffee sales data, we have already made the following calculations:
SST=112772,9 and SSE=26660,4.
Test the hypothesis of no linear association between amount of shelf space and mean weekly
coffee sales for a 1% significance level
9- Calculate r² and interpret it
10- For the coffee example, suppose the marketer wishes to predict next week’s sales when
the coffee will have 5 feet of shelf space. She would like to obtain a 95% prediction interval
for the number of bags to be sold. Compute the prediction Interval. Interpret.

11- Compute 95% confidence intervals for the mean weekly sales at x=4 feet, Interpret.

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