Enterprise Industries produces Fresh, a brand of liquid laundry detergent. In order to manage its inventory more effectively and make revenue projections, the company would like to better predict demand for Fresh. To develop a prediction model, the company has gathered data concerning demand for Fresh over the last 30 sales periods (each sales period is deﬁned to be a four-week period). The demand data are in Fresh2.xlsx. Here, for each sales period,
y = demand for the large size bottle of Fresh (in hundreds of thousands of bottles) in the sales period
x1 = price (in dollars) of Fresh as offered by Enterprise Industries in the sales period
x2 = average industry price (in dollars) of competitors’ similar detergents in the sales period
x3 = Enterprise Industries’ advertising expenditure (in hundreds of thousands of dollars) to promote Fresh in the sales period
You develop the following model to examine the effect of the three x variables on demand for Fresh (y): y=β0+β1×1+β2×2+β3×3+ε
1) Use MS Excel and estimate the above linear regression model. Write the estimated regression model. (5 points)
2) Fill the blanks below. (10 points)
- If the price of Fresh increases one dollar, the sales of Fresh will decrease as many as ______ bottles.
- If the average industry price (in dollars) of competitors’ similar detergents increases one dollar, the sales of Fresh will increase as many as __________ bottles.
- If Enterprise Industries reduces advertising expenditure by $100,000, then the sales of Fresh will decrease as many as ______ bottles.
3) What is the demand for Fresh Detergent in a future sales period when Enterprise Industries’ price for Fresh will be x1 = 3.70, the average price of competitors’ similar detergents will be x2 = 3.90 and Enterprise Industries’ advertising expenditure for Fresh will be x3 = 6.50? (5 points)