Question

The following regression model has been proposed to predict sales at a gas station   where x1 = their previous day’s sales (in $1,000’s), x2 = population within 5 miles (in 1,000’s), x3 = 1 if any form of advertising was used, 0 if otherwise, and sales (in $1,000’s). Predict sales (in dollars) for a store with competitor's previous day's sale of $3,000, a population of 10,000 within 5 miles, and twenty radio advertisements.

Answer 1

given regression equation =

y-hat = 10 -4x₁ + 7x₂ + 18x₃

and we want to predict sales (in dollars) for a store .

also we are given that

previous day's sale of $3,000 = x1 = 3 (in thousands)

a population of 10,000 within 5 miles = x2 = 10 (in thousands)

twenty radio advertisements = x3 = 1 (in thousands)

substituting values in regression model we get

y-hat = 10 -4x₁ + 7x₂ + 18x₃

= 10 - 4 (3) + 7 (10) + 18 (1)

= 10 - 12 + 70 +18

= 86

hence predicted sales is $86000 dollars.

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