Demand Estimation Multiple Regression Analysis

Submitted to: Amnah Abbas

Submitted by: Ambreen Qadri (11571) Syeda Amina Hasan (11565)

Sec: A

Data: Year 1 2 3 4 5 6 7 8 9 10 11 12 Mean: Units sold 2000 2000 3000 1250 1750 2750 2500 1000 1500 1750 2250 2500 2021 Advertising expenses 34000 32000 45000 26000 33000 40000 41000 26000 34000 35000 39000 43000 36500 Price 2600 2700 2700 2900 3000 3200 3200 3200 3500 3600 3700 3800 3175

Summary Output: Regression Statistics 0.971877067 0.944545033 0.932221707 158.11282 12

Multiple R R Square Adjusted R Square Standard Error Observations

ANNOVA Df 2 9 11 SS 3832294.692 224996.9747 4057291.667 MS 1916147 24999.7 F 76.64692 Significance f 2.22706E-06

Regression Residual Total

Coefficients Intercept 270.0315922 Selling exp 0.099520446 Price 0.396440205

Standard Error 418.8033277 0.008039126 0.120310842

T Stat -0.6448

P-value

Lower 95%

Upper 95%

0.0535164 -1217.431262 677.368077 0.061334666 0.11770623 -0.668602446 -0.124278

12.3795 0.006513 -3.2951 0.009302

Y= -270+0.09952X1-0.39644X2 By observing the model we can conclude that Quantity sold has a positive relationship with selling expenditure and has a negative relationship with Price. We can further observe that a 1rs increase may decrease the quantity sold by 0.396 units. And 1rs increase in selling expenditure may increase quantity sold by 0.099 units. We can further conclude that both the variables associated with small p-value are significant predictor of quantity sold. By observing the R2 we can say that 94.4% of total variation is explained by our model(Price and Advertizing expenditure). Remaining 5.6% unexplained variation is due to other factors like market conditions and product exogenous demand. AN increase in advertising expenditure would increase sals by 9.9% while an increase in price will decrease sales by 39%(wrong slope is not in percentages) COEFFECIENT OF DETERMINATION. THE R2 SHOWS FOR EACH UNIT VARIATION IN ADVERTISING AND PRICE THE SALES CHANGE BY 94%. R2=.944 ....... we can observe that 94.4% of total variation is explained by our model(Price and Advertizing expenditure). Remaining 5.6% unexplained variation is due to other factors like market conditions and product exogenous demand. Adjusted R Square: This shows that if we add more variables or transform our independent variables may change the to 0.932 which means that multi-collinearity still exists. STANDARD ERROR: THE STANDARD ERROR SHOWS THAT PREDICTED SLAES OF THE FIRM DIFFER FROM THE OBSERVED SALES BY 158 MILLON.

ANNOVA. THE LOW P VALUE INDICATES THAT THE PRICE HAS A MOR SIGNIFICANT EFFECT ON SALES AS COMPARED TOP ADVERTISING.

. T STATISTICS: THE VERY HIGH T STATISTICS INDICATE THAT BOTH THE VARIABLES ARE STATISTICALLY SIGNIFICANT AT THE 5% SIGNIFICANCE LEVEL.

P values. In order to reject h0 the p values should be less than the level of significance with the five percent significance level the p values are less than 0.05.therefore we reject h 0 Considering the upper and lower 95% based on intercept and price h0 shall be rejected as 0 does not lie within the range. However taking into account the selling expense we would accept h0 as 0 does not fall within the range.

ANOVA F statistics: H0: advertising expenses and prices do not affect the quantity sold H1: advertising expanses and prices do affect the quantity sold At o.o5 significance level our calculated value is 76.65 which is greater than the table value therefore we reject H0, which states that advertising expense and price do not affect quantity sold, and we accept H1, which states that advertising and prices do affect the quantity sold. The significance f is 2.22 which is good as this means that our model is significant enough and we are highly confident.

H0: advertising expenses and prices do not affect the quantity sold

H1: advertising expanses and prices do affect the quantity sold

Since Fcal>Ftab, 76.65>2.22, therefore we reject H0. At 5% level of significance we can conclude that advertising expenses significantly affect quantity sold.