A candy bar manufacturer is interested in trying to estimate how sales are influ

Question

A candy bar manufacturer is interested in trying to estimate how sales are influenced by the price of their product. To do this, the company randomly chooses 6 small cities and offers the candy bar at different prices. Using candy bar sales as the dependent variable, the company will conduct a simple linear regression on the data below: Referring to Table 13-2, what is the percentage of the total variation in candy bar sales explained by the regression model? A. 78.39% B. 88.54% C. 48.19% D. 100%

Explanation / Answer

The statistical software output for regression equation is:

Simple linear regression results:
Dependent Variable: Sales
Independent Variable: Price ($)
Sales = 161.38554 - 48.192771 Price ($)
Sample size: 6
R (correlation coefficient) = -0.88540441
R-sq = 0.78394097
Estimate of error standard deviation: 16.298607

Parameter estimates:

Analysis of variance table for regression model:

Percentage of total variation in candy bar sales explained by the linear regression

= R - sq

= 0.7839 i.e. 78.39%

Option A is correct,

Parameter Estimate Std. Err. Alternative DF T-Stat P-value Intercept 161.38554 26.160686 0 4 6.1690102 0.0035 Slope -48.192771 12.650172 0 4 -3.8096534 0.0189

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