A CEO of a large pharmaceutical company is evaluating whether to place more mone
ID: 3221495 • Letter: A
Question
A CEO of a large pharmaceutical company is evaluating whether to place more money in next year’s budget for television advertising for XBC, a new drug for controlling asthma. The cost of advertising is always an important consideration in the phase 1 roll out of a new drug. He asks whether there is a strong relationship between the number of orders received an the amount of money spent on television advertising for drugs.
Month
X=Advertising cost
(in thousands)
Y=# of orders
(in millions)
1
$68.93
4.902
2
72.62
3.893
3
79.58
5.299
4
58.67
4.130
5
69.18
4.367
6
70.14
5.111
7
83.37
3.923
8
68.88
4.935
9
82.99
5.276
10
75.23
4.654
11
81.38
4.598
12
52.9
2.967
13
61.27
3.999
14
79.19
4.345
15
80.03
4.934
16
78.21
4.653
17
83.77
5.625
18
62.53
3.978
19
88.76
4.999
20
72.64
5.834
The regression equation is
Using the results of the regression in part a) interpret the meaning of the slope in the regression equation
Using the results of the regression in part a) predict the # of orders when advertising cost is $75000
Using the data in part a) and data analysis Correlation, determine how strong you think the relationship is between the number of orders received and the amount of money spent on television advertsining
Using the results of the regression in part a) interpret the meaning of R2
Finally what is the value of the standard error of the estimate (se) and what does it mean? (hint use the regression output in part a))
Month
X=Advertising cost
(in thousands)
Y=# of orders
(in millions)
1
$68.93
4.902
2
72.62
3.893
3
79.58
5.299
4
58.67
4.130
5
69.18
4.367
6
70.14
5.111
7
83.37
3.923
8
68.88
4.935
9
82.99
5.276
10
75.23
4.654
11
81.38
4.598
12
52.9
2.967
13
61.27
3.999
14
79.19
4.345
15
80.03
4.934
16
78.21
4.653
17
83.77
5.625
18
62.53
3.978
19
88.76
4.999
20
72.64
5.834
Explanation / Answer
a) for the given problem the slope value is 0.042. it means if we spent no money on advertisement the no of orders should be 0.042
b) for the given problem the no of orders are 3151 when the advertisment cost is 75000. for the given problem the constant value is 1.156 .
c) for the given the corelation value is 0.584 . it means if we increase the advertisment cost the no.of orders will also increase
d) for the given data the r square value is 0.341. it means may be interpreted as follows: "thirty percent of the variance in the response variable can be explained by the explanatory variable.
e) for the given data the standard error of the estimates is 0.5729 which tells us that the average distance of the data points from the fitted line is about 5%
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