Question

Exercise 18-41 Algo 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: Sales - 19.81 +0.02 Advertising Costs - 0.69Unemployment Rate-1 a. Hiroshi had budgeted $550 toward advertising costs in May 2009. Make a forecast for Sales for June 2009 if the unemployment rate in May 2009 was 8.8% (Enter your answer in dollars not in thousands.) Salese O b. What will be the forecast if he raises his advertisement budget to $610? (Enter your answer in dollars not in thousands.) Sales SC c. Reevaluate the above forecasts if the unemployment rate was 9.1% in May 2009. (Enter your answers in dollars not in thousands.) Advertising Sales, 550

Answer 1

Important : there is written "Enter you answer in dollars not in thousands" however by putting the values in equation you get result in $1000 you have to multiply your answer by 1000 , i.e

• (a) by putting advertising cost 550 and unemployment rate 8.8 we will get 24.738 , and now we will mutiply it by 1000 and get (a) 24738
• (b) by putting advertising cost 610 and unemployment rate 8.8 we will get 25.938 , and now we will mutiply it by 1000 and get (b) 25938
• (c)
  • for advertising cost 550 and unemployment rate 9.1 we will get 24531
  • for adverising cost 610 and unemployment rate 9.1 we will get 25731