Question

The following data is collected on the sales rate based on income and advertising for a given zip code. Please use multiple regression to develop a forecast model to predict sales for this product, and answer the question below:

Income	Advertising	Sales
52	25	20
40	17	14
73	50	30
83	60	35
110	100	40
125	105	42
66	53	28
45	48	22
47	30	19
58	40	26
35	22	10
39	30	13

Which equation is the most appropriate for forecasting sales?

Question 1 options:

1)	Sales = 3.1 + 0.30*Income + 0.04*Advertising

2)	Sales = 3.1 + 0.30*Income

3)	Sales = 2.5 + 0.35*Income

4)	Advertising = 2.5 + 0.35*Income - 0.04*Sales

Answer 1

It is clear that we have to predict the salesusing Income and advertising, so there will be two independent variable(income and advertising) and one dependent (Sales)

So, option B and C are income because there is only independent in each option B and C, which makes these options wrong

option D is also incorrect as the option D equation is calculating advertising using income and sales, but we need to find the sales using income and advertising

So, only option A is a valid answer because it is showing the correct equation format

Sales = 3.1 + 0.30 income + 0.04 advertising

This equation is showing intercept as well as two independent variable (income and advertising) which are used to calculate the sales.