Question

# Part 3) PRICE 'ELASTICITY' (8 points) You are a financial manager for a unit within a textile company that specializes in zippers, buttons and other fasteners. Your area Vice President gives you the last 16 weeks of sales data for a recently launched product, the Elastiband 2.0 (units sold are in thousands). She asks you to analyze the data and provide a reliable sales forecast for the next four weeks. For your convenience, this data is provided in an Excel spreadsheet. You need to use excel to create the scatterplot, but you can use Excel or your calculator to answer the other questions. Week Price Units Week Price Units ($) Sold ($) Sold 3.67 106 5.69 65 2 2.00 196 12 3.21 124 3 3.72 125 13 2.49 154 4 3.76 115 14 4.35 126 5 5.21 69 15 2.47 186 6 4.80 98 16 3.17 146 7 3.19 178 17 4.50 8 3.71 122 18 5.00 9 6.00 54 19 5.25 10 2.89 155 20 4.75 1 11 1. State the independent and dependent variables in this data set. Independent Variable: Dependent Variable: 2. Create a scatterplot in Excel, showing the relationship between price and units sold for the Elastiband 2.0 (include the least squares regression line on the graph). Be sure the independent and dependent variables are on the correct axes, and that your graph looks professional and are labeled and titled appropriately. Paste your scatterplot below. 3. Perform a linear regression on Elastiband 2.0's units sold based on price. Below, write the formula for units sold in terms of price. 4. What is the coefficient of the independent variable for the slope) in this equation? What practical significance does it have here (e.g. what does it tell you)? 5. What is the y-intercept of the regression equation? Does it have a practical interpretation in this case? Explain. 6. What is the value of the coefficient of correlation? Describe what it tells you about the strength of the relationship between these two variables. 7. What is the value of the coefficient of determination? What does it tell you about the amount of variation explained by this linear model? 8. Use your answers from previous questions to predict the number of Elastiband 2.0 units that will be sold in weeks 17 through 20 (fill in the empty cells in the table above). 3 =

Answer 1

1. IV = Price

DV = Units Sold

2. The plot is:

3. The formula is:

y = -33.861 x + 253.866

4. The slope is -33.861.

It means for every increase in price, the units sold would decrease by 33.861.

Price	Units Sold
3.67	106
2	196
3.72	125
3.76	115
5.21	69
4.8	98
3.19	178
3.71	122
6	54
2.89	155
5.69	65
3.21	124
2.49	154
4.35	126
2.47	186
3.17	146