Question

5. Osteoporosis is a degenerative disease that primarily affects women over the age of 65. A research analyst wants to forecast sales of StrongBones, a prescription drug for treating this debilitating disease. She uses the model Sales = β₀ + β₁Population + β₂Income + ε,where Sales refers to the sales of StrongBones (in $1,000,000s), Population is the number of women over the age of 65 (in millions), and Income is the average income of women over the age of 65 (in $1,000s). She collects data on 36 cities across the United States and obtains the following regression results:

	Coefficients	Standard Error	t Stat	p-Value
Intercept	10.23	3.91	2.62	0.0186
Population	8.19	2.36	3.47	0.0403
Income	7.46	6.49	1.15	0.3691

a. What is the sample regression equation? (Enter your answers in millions rounded to 2 decimal places.)

Salesˆ=Sales^=    +  Population +  Income.

b-1. Interpret the coefficient of population.

• As the number of women over the age of 65 increases by 1 million, sales of StrongBones is predicted to increase by $8.19 million.

• As the number of women over the age of 65 increases by 1 million, sales of StrongBones is predicted to increase by $7.46 million.

• As the number of women over the age of 65 increases by 1 million, sales of StrongBones is predicted to increase by $8.19 million, holding income constant.

• As the number of women over the age of 65 increases by 1 million, sales of StrongBones is predicted to increase by $7.46 million, holding income constant.

b-2. Interpret the coefficient of income.

• As the average income of women over the age of 65 increases by $1,000, sales of StrongBones is predicted to increase by $8.19 million.

• As the average income of women over the age of 65 increases by $1,000, sales of StrongBones is predicted to increase by $7.46 million.

• As the average income of women over the age of 65 increases by $1,000, sales of StrongBones is predicted to increase by $8.19 million, holding population constant.

• As the average income of women over the age of 65 increases by $1,000, sales of StrongBones is predicted to increase by $7.46 million, holding population constant.

c. Predict sales if a city has 1.0 million women over the age of 65 and their average income is $38,000. (Enter your answer in millions rounded to 2 decimal places.)

Answer 1