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(S/B: 12/64) Let Yt be the sales during month t (in thousands of dollars) for a
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(S/B: 12/64) Let Yt be the sales during month t (in thousands of dollars) for a photography studio, and let Pt be the price charged for portraits during month t. The data are in the file Week 4 Assignment Chapter 12 Problem 64 Download Week 4 Assignment Chapter 12 Problem 64. Use regression to fit the following model to these data:
Yt = a + b1Yt−1 + b2Pt + et
This equation indicates that last month’s sales and the current month’s price are explanatory variables. The last term, et, is an error term.
For your assignment, complete the following:
Part A: If the price of a portrait during Month 21 is $10, what would you predict for sales in Month 21?
Part B: Does there appear to be a problem with autocorrelation of the residual? Explain your answer.
In your Excel spreadsheet,
Utilize the regression model.
Utilize the support tool of Excel.
Predict sales as described in Part A.
Explain any problem as described in Part B.