# DEMAND PROJECT: REGRESSION ANALYSIS

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```					             DEMAND PROJECT: REGRESSION ANALYSIS
The demand for Checker’s Pizza is shown below.
where:        QC    = Demand for Checkers Pizza (units – whole pizza)
PC    = Price of Checker’s Pizza (dollars)
PBMAC = Price of Big Mac (dollars)
A     = Checker’s Pizza Advertising Expenditure (dollars
Y     = Annual Income (dollars)

QC          PC       PBMAC        A         Y
2659        8.65      1.25      10.55     25500
2870        8.65      1.35      10.45     25600
2875        8.65      0.16      10.35     25700
2849        8.65      1.05      10.30     25970
2842        8.65      0.95      10.30     25970
2819        8.65      0.95      10.25     25750
3039        7.50      0.85      10.25     25750
3059        7.50      1.15      10.15     25950
3040        7.50      1.25      10.00     25950
3090        7.50      1.75      10.00     26120
2934        8.50      1.75      10.25     26120
2942        8.50      1.85      10.25     26120
2834        8.50      1.50       9.75     26200
2517        9.99      1.10       9.75     26350
2503        9.99      1.05       9.65     26450
2502        9.99      1.25       9.60     26350
2557        9.99      0.55      10.00     26850
2586       10.25      0.55      10.25     27350
2623       10.25      1.15      10.20     27350
2633       10.25      1.15      10.00     27950
2721        9.75      0.55      10.10     28159
2729        9.75      0.55      10.10     28264
2791        9.75      1.20      10.10     28444
2821        9.75      1.20      10.25     28500

Averages
=                9.05       1.09     10.12     26613

Using regression analysis and a linear functional form, estimate the demand for
Checker’s pizza. Fully evaluate the model and include the following in your report.
1.    Write the estimated regression equation for the demand for Checker’s pizza, the standard
error of the estimate, the standard error of the coefficients, and the coefficient of
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determination (R ).
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2.    Interpret all of the coefficients, including the intercept, and the R .
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3.    Compute and interpret the corrected R .
4.    Compute the F-statistic and conduct and F-test at the alpha = 0.01 level. (Note:
5.    Construct a confidence interval around the dependent variable (quantity demanded for
Checker’s pizza) at the alpha = 0.05 level.
6.    Construct a confidence interval around the income coefficient the alpha = 0.01 level.

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7.     Do increases in advertising increase the quantity the demand for Checker’s pizza? Test
this relationship at the alpha = 0.01 level. (Note: Include your hypotheses).
8.     Does price of Checker’s pizza impact the demand for Checker’s pizza? Test this
relationship at the alpha = 0.01 level. (Note: Include your hypotheses and conclusion).
9.     Using the average value for the independent variables and your estimated demand
function, compute the demand for Checker’s pizza and the price, cross-price, advertising,
and income elasticities. (Use the point elasticities and make sure you have two
interpretations of each elasticity, except for advertising).
explain why and if yes explain why and how much revenue would be generated by a
(b) Would you advise your manager to have a sale in order to increase revenues? To
test, coefficients, and price elasticity)

This project will be done in class next Tuesday March 1, 2011. You need to run your
analysis and bring the printout to class to be turn in.

Microsoft Office Excel 2010 Instructions:
REGRESSION ANALYSIS IN EXCEL: DEMAND PROJECT
COMMENT: DOUBLE CLICK ON EXCEL
COMMENT: YOU SHOULD BEGIN IN CELL A1..A1
TYPE: IN CELL A1..A1 “QC”      (Quantity demand for Checker’s pizza)
IN CELL B1..B1 “PC”    (Price of Checker’s pizza)
IN CELL C1..C1 “PBMAC” (Price of Big Mac)
IN CELL E1..E1 “Y “    (Income)
COMMENT: NOW YOU WANT TO INPUT YOUR CHECKER’S PIZZA QUANTITY INTO CELLS A2..A25
E.G.,
IN CELL         A1..A1         QC
TYPE IN CELL A2..A2            2659

TYPE IN CELL A25..A25      2821
COMMENT: NOW YOU WANT TO INPUT YOUR CHECKER’S PIZZA PRICE DATA INTO CELLS B2..B25
E.G.,
IN CELL      B1..B1        PC
TYPE IN CELL B2..B2        8.65

TYPE IN CELL B25..B25      9.75
COMMENT: NOW YOU WANT TO INPUT YOUR BIG MAC PRICE DATA INTO CELLS C2..C25
E.G.,
IN CELL      C1..C1        PBMAC
TYPE IN CELL C2..C2        1.25

TYPE IN CELL C25..C25      1.20
COMMENT: NOW YOU WANT TO INPUT YOUR ADVERSTING DATA INTO CELLS D2..D25
E.G.,
IN CELL      D1..D1        A
TYPE IN CELL D2..D2        10.55

TYPE IN CELL D25..D25      10.25
COMMENT: NOW YOU WANT TO INPUT YOUR INCOME DATA INTO CELLS E2..E25
E.G.,
IN CELL      E1..E1        Y
TYPE IN CELL E2..E2        25500
TYPE IN CELL E25..E25      28500

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COMMENT: CLICK ON FILE TAB
COMMENT: CLICK ON OPTIONS
COMMENT: CLICK ON ANALYSIS TOOLPAK
COMMENT: CLICK ON GO (NEXT TO “MANAGE EXCEL ADD-INS”)
COMMENT: CLICK OK (MAKE SURE THAT ANALYSIS TOOLPAK IS CHECKED)
COMMENT: CLICK ON DATA TAB
COMMENT: CLICK ON DATA ANALYSIS (LAST OPTION ON RIGHT)
COMMENT: SCROLL DOWN AND CLICK REGRESSION
COMMENT: CLICK OK
COMMENT: INPUT “Y” RANGE, DEPENDENT VARIABLE:   A1: A25.
COMMENT INPUT “X(s)” RANGE, INDEPENDENT VARIABLE(s) RANGE:  B1: E25.
COMMENT CLICK ON LABLES
COMMENT INPUT “OUTPUT” RANGE A28: G48.
COMMENT NOW CLICK ON OK

Microsoft Office Excel 2007 Instructions:
REGRESSION ANALYSIS IN EXCEL: DEMAND PROJECT

COMMENT: DOUBLE CLICK ON EXCEL
COMMENT: YOU SHOULD BEGIN IN CELL A1..A1
TYPE: IN CELL A1..A1 “QC”      (Quantity demand for Checker’s pizza)
IN CELL B1..B1 “PC”    (Price of Checker’s pizza)
IN CELL C1..C1 “PBMAC” (Price of Big Mac)
IN CELL E1..E1 “Y “    (Income)
COMMENT: NOW YOU WANT TO INPUT YOUR CHECKER’S PIZZA QUANTITY INTO CELLS A2..A25
E.G.,
IN CELL         A1..A1         QC
TYPE IN CELL A2..A2            2659

TYPE IN CELL A25..A25      2821
COMMENT: NOW YOU WANT TO INPUT YOUR CHECKER’S PIZZA PRICE DATA INTO CELLS B2..B25
E.G.,
IN CELL      B1..B1        PC
TYPE IN CELL B2..B2        8.65

TYPE IN CELL B25..B25      9.75
COMMENT: NOW YOU WANT TO INPUT YOUR BIG MAC PRICE DATA INTO CELLS C2..C25
E.G.,
IN CELL      C1..C1        PBMAC
TYPE IN CELL C2..C2        1.25

TYPE IN CELL C25..C25      1.20
COMMENT: NOW YOU WANT TO INPUT YOUR ADVERSTING DATA INTO CELLS D2..D25
E.G.,
IN CELL      D1..D1        A
TYPE IN CELL D2..D2        10.55

TYPE IN CELL D25..D25        10.25
COMMENT: NOW YOU WANT TO INPUT YOUR INCOME DATA INTO CELLS E2..E25
E.G.,
IN CELL        E1..E1        Y
TYPE IN CELL E2..E2          25500
TYPE IN CELL E25..E25        28500
COMMENT: CLICK ON THE OFFICE BUTTON (TOP LEFT CORNER)
COMMENT: CLICK ON EXCEL OPTIONS
COMMENT: CLICK ON ANALYSIS TOOLPAK

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COMMENT: CLICK ON GO (NEXT TO “MANAGE EXCEL ADD-INS”)
COMMENT: CLICK OK (MAKE SURE THAT ANALYSIS TOOLPAK IS CHECKED)
COMMENT: CLICK ON DATA TAB
COMMENT: CLICK ON DATA ANALYSIS (LAST OPTION ON RIGHT)
COMMENT: SCROLL DOWN AND CLICK REGRESSION
COMMENT: CLICK OK
COMMENT: INPUT “Y” RANGE, DEPENDENT VARIABLE:   A1: A25.
COMMENT INPUT “X(s)” RANGE, INDEPENDENT VARIABLE(s) RANGE:  B1: E25.
COMMENT CLICK ON LABLES
COMMENT INPUT “OUTPUT” RANGE A28: G48
COMMENT NOW CLICK ON OK

NOTE: If you already have ANALYSIS TOOLPAK on your
computer you can go straight to the DATA tab.

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