I am working on a discuss post. Here are the guidelines: pick a company/industry

Question

I am working on a discuss post. Here are the guidelines: pick a company/industry (this can be a firm or industry that you currently work in) and explain how you would go about estimating the demand for your product or service. Also form a regression equation by choosing the appropriate independent variables that you think would influence your demand (such as sales which would be your dependent variable). What signs (+ or -) might the parameter estimates have for each of your chosen variables? (You do not have to actually perform a regression and come up with the actual parameter estimates.)

Here is what I have:

With higher education the product that is being sold is education and the dream of achieving a college degree. To estimate the demand for higher education, particularly at Ancilla College, I would look at cost of education at Ancilla, income of families with children within a specific region, and the average cost education at comparable institutions.

Q = the demand for higher education

P = cost of education

M = family income

PR = the cost of comparable schools

The regression equation would then be: Q = a + bP +cM +dPR

My problem is that I don't fully understand how to explain the + or - signs and how each variable relates to one another. I'm not positive my equation is correct. How do I determine the relationship between each to explain what it is + or -?

Explanation / Answer

To estimate the demand for higher education, particularly at Ancilla College.

We have to make this model specific to Ancilla College.  

1)Cost of education at Ancilla

2)The income of families with children within a specific region,

3) and the average cost education at comparable institutions.

You might also want to include

4) The number of courses offered at Ancilla College.

5) The average salary package offered to students passing from Ancilla College.

While selecting the factors we should include the factors for which data is likely to be made available. (For ex. the psychological factor of students interest in education might be a plausible reason for the demand for higher education but it is very difficult to measure and collect data for it )

THE REGRESSION EQUATION

Q = the demand for higher education

P = cost of education/ (College Fees)

M = family income

PR = the cost of comparable schools

The regression equation would then be: Q = a + bP +cM +dPR

I assume 'a' is the intercept term and it will -dPR instead of +dPR and -bP instead of +bP.

Regarding your query of + or - signs

The signs depend on the positive or negative relationship between the dependent and the independent variable. For Example, The more the income of the family, more likely they are able to afford and have a higher education. Hence, +cM

The more the fees of the college, the less the students will be willing to take admissions there. Hence, -bP.

The more the fees of the comparable college, the less the students will be willing to take admissions in Ancilla College. Hence, -dPR.

To determine the sign + or -, you have to think whether there is a positive or negative correlation between the independent variable and the dependent variable.

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