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Problem Set: GDP: Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

This document provides directions for a problem set involving hypothesis testing and linear regression analysis. Students are asked to analyze sales data for a snack food company that introduced a new flavor of potato chips. The data relates the price per bag of chips to the number of truckloads sold. Students must: 1) Conduct a hypothesis test to determine if there is a relationship between price and amount sold. 2) Use the linear regression results to predict sales if the price was raised to $2.25 per bag. 3) Consider how consumer sensitivity to price might change if a similar competing product entered the market.

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547 views4 pages

Problem Set: GDP: Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

This document provides directions for a problem set involving hypothesis testing and linear regression analysis. Students are asked to analyze sales data for a snack food company that introduced a new flavor of potato chips. The data relates the price per bag of chips to the number of truckloads sold. Students must: 1) Conduct a hypothesis test to determine if there is a relationship between price and amount sold. 2) Use the linear regression results to predict sales if the price was raised to $2.25 per bag. 3) Consider how consumer sensitivity to price might change if a similar competing product entered the market.

Uploaded by

kachizih
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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BUS 5030: Applied Economics and Statistics

Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

Complete this worksheet using the directions within to guide you. Submit your completed worksheet in the “Assignment and Grades”
tab in your course menu. When you have submitted this assignment for grading, please return to Module 4 for a module wrap-up.

Problem Set: GDP


Directions: Consider the following scenario: You have been awarded a contract to analyze sales data for a snack food company.
They have introduced a new flavor of potato chips (crisps). As part of your analysis, you will need to conduct a hypothesis test on
the results of a simple linear regression to determine if there is a relationship between price and amount of product sold. Here is
the data you need to analyze:
Price per Bag of Crisps Number of Truck Loads Sold

$2.00 14

$1.90 18

$1.75 24

$1.50 30

$1.25 35

$1.00 41

$0.90 46

$0.75 52

$0.60 57

$0.50 64
BUS 5030: Applied Economics and Statistics
Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

Part 1: Set up a hypothesis test (using all six steps) and then conduct the test. You can assume that the data is okay to run a
simple linear regression model. So, the first step in the test is already done!

1. Choose the right test.

We will do a simple linear regression. (DONE!)

2. Write down your hypothesis.

The hypothesis is our idea. So, we can formally state it as:

Sales by the truckload will be predicted by ________________________________.

3. Decide on your risk of being wrong.

Our statistical software automatically computes this as equal to 0.05, and this is a standard for academic studies. We’ll stick with
that. (DONE!)

4. Run the statistical analysis and get the initial results.

We will need to use some statistical software to do this. Click on the link and enter the list of X (price per bag of chips) and Y
(number of truckloads sold) values on the screen.

Once you do that, take a look at the output.

5. Figure out the probability if you are right or wrong.

The chance that our idea is wrong given this data is the probability value, which has been abbreviated here as P Value. The value is
_________.
BUS 5030: Applied Economics and Statistics
Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

6. Decide whether your idea is supported by the data and test

The software tells us that the results are either significant or not significant on the “Deviation from horizontal?” line. Are your
results significant?

How well did the number of days visiting the coffee shop predict the sales? It explained about _____% of the variation in sales,
according to the R square calculation. Is this a good result in your opinion? Why or why not?

Part 2: Let’s suppose a manager wanted to raise price to $2.25 a bag. Take a look at the graph the calculator generated. If you
could extend the line up to $2.25, can you predict about how many truckloads would be sold?

Part 3: What would happen if a very similar flavor from another company came on the market and was a good substitute for the
chips? Would consumers be more or less sensitive to the price of your product?
BUS 5030: Applied Economics and Statistics
Module 4 - Problem Set: Hypothesis Testing and Linear Regression Worksheet

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