Question

The owner of the food chain Lobster Grill wants to investigate the factors that affect sales at their beachfront restaurants. She chooses four variables as estimators of sales: # of parking spaces near the restaurant, distance of the restaurant from the beach (measured in miles), # of workers, and whether or not it is the summer season. The regression equation is:

Predicted Sales = 64 + 0.39 Parking - 1.6 Distance + 1.4 Workers + 2.25 Summer

where sales is measured in thousands of dollars.

a) Interpret the y-intercept. Does it make sense?

b) Interpret the coefficient on Parking.

c) Interpret the coefficient on Distance.

d) Interpret the coefficient on Summer.

e. What are Estimated Sales if one particular location has 20 parking spaces, is 0.75 miles from the beach, employs 12 workers, and it is not the summer season?

Answer 1

a) The y intercept means that the predicted sales of Lobster Grill depends positively on the number of praking spaces available, number of workers, and Summer season. While it depends negatively on the distance of the restaurant from the beach.

b) The coefficient on Parking is +0.39 which means that as parking space increase by 1 unit, predicted sales will increase by 0.39 thousand or $390.

c) The coefficient on Distance is -1.6 which means that as distance increase by 1 mile, predicted sales will decrease by $1.6 thousand or $1,600.

d) The coefficient on Summer is +2.25 which means that if there is summer, predicted sales will increase by 2.25 thousand or $2,250.

e) Predicted Sales = 64 + 0.39(20) - 1.6(0.75) + 1.4(12) + 2.25(0) = 64 + 7.8 - 1.2 + 16.8 = 87.4 thousand = $87,400