Eco550 Assignment 1

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Assignment 1: Making Decisions Based on Demand and Forecasting Regression analysis is a tool that is used to determine a best fit line to a series of data points (handout,Using regression analysis…, ECO550 course shell). If the data points are, say, for a company that measured demand at various prices, along with how much the competitor was charging for the same thing, how much was spent on advertising, and the personal income of the potential customers, a regression analysis can be used to develop a best fit line to this data. The result will be an estimated demand function showing us how demand is affected by the other independent variables. This could be very useful for the managers of the business who need to decide what is the best way to maximize demand for their business product. The following data is for The Pizza Company. The data was inputted into an Excel spreadsheet, and an estimated regression was calculated. Using the calculation results, the coefficient of determination will be extracted and interpreted to show what it indicates and how it will influence the decision to open the pizza business in the local community. Additional variables that may improve the coefficient of determination will also be explained. A test of the statistical significance of the independent variable and the regression equation will also be done to indicate whether to open the pizza shop or not. Also, a forecast for the demand of the pizza will be done for the next four periods using the regression equation (McGuigan, Moyer, & Harris, 2011). Finally, based on the forecasted demand, a decision will be provided with rationale and support whether to open a pizza business locally or not. Part 1 Estimated Regression | The Pizza Company | Market | Demand (Q) | Price (P) | Competitor Price (Px) | Advertising (Ad) | Income (I) | 1 | 596,611 |

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