Hiroshi Sato, an owner of a sushi restaurant in San Francisco, has been following an aggressive marketing campaign to thwart the effect of rising unemployment rates on business. He used monthly data on sales ($1,000s), advertising costs ($), and the unemployment rate (%) from January 2008 to May 2009 to estimate the following sample regression equation:SalesˆtSales^t = 12.43 + 0.02Advertising Costst−1 − 0.52Unemployment Ratet−1. a. Hiroshi had budgeted $540 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 8%. (Enter your answer in dollars not in thousands.) SalesˆtSales^t $ b. What will be the forecast if he raises his advertisement budget to $640? (Enter your answer in dollars not in thousands.) SalesˆtSales^t $ c. Reevaluate the above forecasts if the unemployment rate was 8.6% in May 2009. (Enter your answers in dollars not in thousands.)
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
Hiroshi Sato, an owner of a sushi restaurant in San Francisco, has been following an aggressive marketing campaign to thwart the effect of rising unemployment rates on business. He used monthly data on sales ($1,000s), advertising costs ($), and the unemployment rate (%) from January 2008 to May 2009 to estimate the following sample regression equation:
SalesˆtSales^t = 12.43 + 0.02Advertising Costst−1 − 0.52Unemployment Ratet−1.
a. Hiroshi had budgeted $540 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 8%. (Enter your answer in dollars not in thousands.)
SalesˆtSales^t $
b. What will be the forecast if he raises his advertisement budget to $640? (Enter your answer in dollars not in thousands.)
SalesˆtSales^t $
c. Reevaluate the above forecasts if the unemployment rate was 8.6% in May 2009. (Enter your answers in dollars not in thousands.)
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