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What signs do you expect

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You work for Segway, in the sales division of the Drift W1 (which are basically motorized roller skates). You've traveled into the future (since they aren't available yet) and collected data on monthly sales (S) and the price of the Drift W1 (P), both in dollars, as well as the daily average summer temperature in your most popular market (T) in degrees Fahrenheit. You estimate the following regression model: S = a + bP + cT. In your regressions, you usually look for a 10%-or-better level of confidence.

a. What signs do you expect for a, b, and c?

b. Your regression yields the following results:

Adjusted R Square

0.820

Independent Variables

Coefficients

Standard Error

t Stat

P-value

Intercept

1936

309

6.259

0.00153

P

-4.71

0.81

-5.816

0.00212

T

6.57

3.50

1.879

0.11902

Interpret what these coefficients mean.

c. Does price have a statistically significant effect on sales?

d. Does average temperature have a statistically significant effect on sales?

e. What portion of the total variation in sales remains unexplained?

f. Segway is considering selling the Drift W1 in a new city, where the average daily summer temperature is 73°, for a price of $320. What level of sales would you expect in this new city (rounded to the nearest dollar)?

Reference no: EM132162110

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