Reference no: EM131709729

Question: Echlin, Inc., makes parts for automobiles. The company is engaged in strong competition with Japanese, Taiwanese, and Korean manufacturers of the same automobile parts. Recently, the company hired a statistician to study the relationship between monthly sales and the independent variable, number of cars on the road. Data on the explanatory variable are published in national statistical reports. Because of the keen competition with Asian firms, an indicator variable was also used. This variable was given the value 1 during months when restrictions on imports from Asia were in effect and 0 when such restrictions were not in effect. Denoting sales by Y, total number of cars on the road by X1, and the import restriction dummy variable by X2, the following regression equation was estimated:

Y^{^} = -567.3 + 0.006X₁ + 26,540X₂

The standard error of the intercept estimate was 38.5, that of the coefficient of X1 was 0.0002, and the standard error of the coefficient of X2 was 1,534.67. The multiple coefficient of determination was R2 = 0.783. The sample size used was n = 60 months (5 years of data). Analyze the results presented. What kind of regression model was used? Comment on the significance of the model parameters and the value of R2. How many distinct regression lines are there? What likely happens during times of restricted trade with Asia?