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
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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)
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