A

1. Explain different phases of Problem Solving.

The fundamental purpose of analytics is to help managers solve problems and make decisions. The
techniques of analytics represent only a portion of the overall problem-solving and decision-making
process. Problem solving is the activity associated with defining, analysing, and solving a problem
and selecting an appropriate solution that solves a problem.
Problem solving consists of several phases:
1. Recognizing a problem
2. Defining the problem
3. Structuring the problem
4. Analysing the problem
5. Interpreting results and making a decision
6. Implementing the solution
1. Recognizing a Problem
Managers at different organizational levels face different types of problems. In a manufacturing firm,
for instance, top managers face decisions of allocating financial resources,
building or expanding facilities, determining product mix, and strategically sourcing production.
Middle managers in operations develop distribution plans, production and inventory schedules, and
staffing plans. Finance managers analyze risks, determine investment
strategies, and make pricing decisions. Marketing managers develop advertising plans
and make sales force allocation decisions. In manufacturing operations, problems involve
the size of daily production runs, individual machine schedules, and worker assignments.
Whatever the problem, the first step is to realize that it exists.
How are problems recognized? Problems exist when there is a gap between what is
happening and what we think should be happening. For example, some consumer products
manager might feel that distribution costs are too high. This recognition might result from
comparing performance with a competitor, observing an increasing trend compared to pre vious
years.
2.Defining the Problem
The second step in the problem-solving process is to clearly define the problem. Finding
the real problem and distinguishing it from symptoms that are observed is a critical step.
For example, high distribution costs might stem from inefficiencies in routing trucks, poor
location of distribution centres, or external factors such as increasing fuel costs. The problem might be
defined as improving the routing process, redesigning the entire distribution
system, or optimally hedging fuel purchases.
Defining problems is not a trivial task. The complexity of a problem increases when
the following occur:
• The number of potential courses of action is large.
• The problem belongs to a group rather than to an individual.
• The problem solver has several competing objectives.
• External groups or individuals are affected by the problem.
• The problem solver and the true owner of the problem—the person who experi ences the
problem and is responsible for getting it solved—are not the same.
• Time limitations are important.
These factors make it difficult to develop meaningful objectives and characterize the
range of potential decisions. In defining problems, it is important to involve all people
who make the decisions or who may be affected by them.
3. Structuring the Problem
This usually involves stating goals and objectives, characterizing the possible decisions,
and identifying any constraints or restrictions. For example, if the problem is to redesign
a distribution system, decisions might involve new locations for manufacturing plants
and warehouses (where?), new assignments of products to plants (which ones?), and the
amount of each product to ship from different warehouses to customers (how much?).
The goal of cost reduction might be measured by the total delivered cost of the product.
The manager would probably want to ensure that a specified level of customer service—
for instance, being able to deliver orders within 48 hours—is achieved with the redesign.
This is an example of a constraint. Structuring a problem often involves developing a
formal model.
4. Analyzing the Problem
Here is where analytics plays a major role. Analysis involves some sort of experimentation
or solution process, such as evaluating different scenarios, analyzing risks associated with
various decision alternatives, finding a solution that meets certain goals, or determining
an optimal solution. Analytics professionals have spent decades developing and refining a
variety of approaches to address different types of problems. Much of this book is devoted
to helping you understand these techniques and gain a basic facility in using them.

5. Interpreting Results and Making a Decision

Interpreting the results from the analysis phase is crucial in making good decisions. Models
cannot capture every detail of the real problem, and managers must understand the limitations of
models and their underlying assumptions and often incorporate judgment into making a decision. For
example, in locating a facility, we might use an analytical procedure to
find a “central” location; however, many other considerations must be included in the decision, such
as highway access, labour supply, and facility cost. Thus, the location specified by
an analytical solution might not be the exact location the company actually chooses.
6. Implementing the Solution
This simply means making it work in the organization, or translating the results of a model
back to the real world. This generally requires providing adequate resources, motivat ing employees,
eliminating resistance to change, modifying organizational policies, and
developing trust. Problems and their solutions affect people: customers, suppliers, and
employees. All must be an important part of the problem-solving process. Sensitivity to
political and organizational issues is an important skill that managers and analytical pro fessionals
alike must possess when solving problems.
 2. “Business Analytics is changing how managers make decisions” - discuss this in any one
of the following areas.
a. Finance
b. Operations
c. Marketing
d. Human Resource

b. Operations

Business analytics is indeed changing how managers make decisions in the field of operations.
Operations management involves managing the processes and activities within an organization to
ensure efficient production and delivery of goods and services. Business analytics provides valuable
insights and data-driven decision-making tools that significantly impact operations management in
several ways:

1. Demand forecasting and inventory management: Business analytics enables operations managers to
analyze historical data, market trends, and customer behavior to forecast demand more accurately.
With better demand forecasting, companies can optimize their inventory levels, reduce stockouts, and
avoid excess inventory costs.
2. Supply chain optimization: Analytics helps optimize the supply chain by analyzing data on suppliers,
transportation, and logistics. Operations managers can identify bottlenecks, inefficiencies, and risks in
the supply chain and make data-driven decisions to enhance the flow of materials, reduce lead times,
and improve overall supply chain performance.
3. Process improvement and efficiency: Business analytics allows operations managers to monitor and
analyze key performance indicators (KPIs) such as cycle time, productivity, and quality metrics. By
identifying process inefficiencies and bottlenecks through data analysis, managers can implement
improvements, streamline operations, and increase productivity.
4. Resource allocation and capacity planning: Analytics helps operations managers allocate resources
effectively and plan capacity based on demand forecasts and historical data. By analyzing production
volumes, resource utilization, and customer demand patterns, managers can optimize resource
allocation, reduce costs, and ensure that production capacity aligns with market demands.
5. Quality control and predictive maintenance: Business analytics facilitates the implementation of
quality control measures by analyzing data from sensors, monitoring systems, and customer feedback.
Operations managers can detect patterns and anomalies in the production process, identify potential
quality issues, and take proactive measures to ensure product quality. Additionally, predictive
maintenance analytics can help identify potential equipment failures in advance, allowing for
scheduled maintenance and minimizing production downtime.
6. Real-time decision making: With the availability of real-time data and advanced analytics tools,
operations managers can make more informed and timely decisions. They can monitor operations in
real-time, respond to changing market conditions, and adjust production plans or resource allocations
accordingly.

Overall, business analytics is transforming operations management by providing managers with data-
driven insights, enabling more accurate forecasting, optimizing the supply chain, improving process
efficiency, enhancing resource allocation, ensuring quality control, and enabling real-time decision-
making. These advancements result in improved operational performance, reduced costs, and
increased competitiveness for organizations in the field of operations
3. Explain the elements of a decision model.
A decision model is a logical or mathematical representation of a problem or business situation that
can be used to understand, analyze, or facilitate making a decision. Most decision models have three
types of input:
1. Data, which are assumed to be constant for purposes of the model. Some examples would be costs,
machine capacities, and intercity distances.
2. Uncontrollable variables, which are quantities that can change but cannot be directly controlled by
the decision maker. Some examples would be customer demand, inflation rates, and investment
returns. Often, these variables are uncertain.
3. Decision variables, which are controllable and can be selected at the discretion of the decision
maker. Some examples would be production quantities (see Example 1.5), staffing levels, and
investment allocations. Decision models characterize the relationships among the data, uncontrollable
variables, and decision variables, and the outputs of interest to the decision maker (see Figure 1.7).
Decision models can be represented in various ways, most typically with mathematical functions and
spreadsheets. Spreadsheets are ideal vehicles for implementing decision models because of their
versatility in managing data, evaluating different scenarios, and presenting results in a meaningful
fashion.
 4. Explain how MS excel aid Business Analytics.
MS Excel is a widely used spreadsheet software that can aid in business analytics in several ways.
While it may not be as sophisticated as dedicated business intelligence tools or data analysis software,
Excel provides a range of features that can be leveraged for basic to intermediate business analytics
tasks. Here are some ways in which MS Excel can aid business analytics:

1. Data organization and storage: Excel allows users to organize and store data in a structured manner. It
provides a grid-like interface where data can be entered into cells, and multiple sheets can be used to
organize different datasets. This makes it convenient to store and manage data for analysis purposes.
2. Data cleaning and manipulation: Excel offers various functions and formulas that facilitate data
cleaning and manipulation tasks. Users can perform operations such as sorting, filtering, removing
duplicates, text manipulation, and data formatting. These features help in preparing data for analysis
by ensuring its quality and consistency.
3. Data visualization: Excel includes charting and graphing capabilities that enable users to create visual
representations of data. Charts like bar graphs, line graphs, pie charts, and scatter plots can be
generated easily, providing a visual understanding of trends, patterns, and relationships within the
data. This aids in data exploration and presentation of findings.
4. Basic statistical analysis: Excel provides a range of built-in functions for basic statistical analysis.
Users can calculate descriptive statistics, such as mean, median, standard deviation, and variance, as
well as perform calculations for correlation, regression analysis, and t-tests. These statistical functions
help in analyzing data and drawing insights.
5. Pivot tables: Pivot tables are a powerful feature in Excel that allows users to summarize and analyze
large datasets. Users can quickly summarize and aggregate data, create custom reports, and perform
multidimensional analysis. Pivot tables enable users to slice and dice data, uncover patterns, and gain
insights from complex datasets.
6. What-if analysis: Excel's "What-If Analysis" tools, such as Goal Seek and Scenario Manager, enable
users to explore different scenarios and analyze the impact of changes in variables. This functionality
is particularly useful for forecasting, budgeting, and decision-making processes.
7. Macros and automation: Excel supports the creation of macros, which are recorded sets of actions that
can be replayed to automate repetitive tasks. Macros can be used to automate data cleaning,
formatting, and analysis processes, saving time and improving efficiency.

While MS Excel has its limitations for advanced analytics tasks and handling large datasets, it
remains a versatile and accessible tool for basic to intermediate business analytics. It can be utilized
by businesses of all sizes to perform data analysis, generate insights, and support decision-making
processes.
B
Write Short notes on
a) Dashboards
Making data visible and accessible to employees at all levels is a hallmark of effective modern
organizations. A dashboard is a visual representation of a set of key business measures. It is derived
from the analogy of an automobile’s control panel, which displays speed, gasoline level, temperature,
and so on. Dashboards provide important summaries of key business information to help manage a
business process or function. Dashboards might include tabular as well as visual data to allow
managers to quickly locate key data. Figure 3.3 shows a simple dashboard for the product sales data in
Figure 3.1 showing monthly sales for each product individually, sales of all products combined, total
annual sales by product, a comparison of the last two months, and monthly percent changes by
product.
 b) Steps in building good regression models:
Building a good regression model involves several key steps. Here are the general steps to follow
when building a regression model:

1. Define the problem: Clearly articulate the problem you are trying to solve with regression analysis.
Identify the target variable (the variable you want to predict) and the predictor variables (the variables
that influence the target variable).
2. Gather and prepare data: Collect the relevant data for your analysis. Ensure that your data is accurate,
complete, and representative of the problem you are addressing. Preprocess the data by handling
missing values, dealing with outliers, and encoding categorical variables if necessary.
3. Explore and visualize the data: Perform exploratory data analysis (EDA) to gain insights into the
relationships between variables. Visualize the data using techniques such as scatter plots, histograms,
and correlation matrices to identify patterns, trends, and potential nonlinearities.
4. Split the data: Divide your dataset into training and testing subsets. The training set is used to build
and train the regression model, while the testing set is used to evaluate its performance on unseen
data. Typically, a common split is 70-80% for training and 20-30% for testing.
5. Select appropriate features: Identify the predictor variables that are most relevant to the target
variable. Feature selection techniques, such as correlation analysis, backward/forward selection, or
regularization methods like Lasso or Ridge regression, can help you choose the most significant
features and avoid overfitting.
6. Choose a regression algorithm: Select an appropriate regression algorithm based on your problem
type, data characteristics, and assumptions. Common regression algorithms include linear regression,
polynomial regression, decision tree regression, random forest regression, and support vector
regression, among others.
7. Train the regression model: Fit the chosen regression model on the training data. The model learns the
relationships between the predictor variables and the target variable by minimizing the prediction
errors. This step involves estimating the model parameters or coefficients.
8. Evaluate the model: Assess the performance of the regression model on the testing data. Common
evaluation metrics for regression models include mean squared error (MSE), root mean squared error
(RMSE), mean absolute error (MAE), R-squared (coefficient of determination), and adjusted R-
squared. Compare these metrics with the baseline or other models to determine how well your model
performs.
9. Fine-tune and optimize: If the model's performance is not satisfactory, consider fine-tuning it. This
can involve adjusting hyperparameters, such as regularization strength, tree depth, or learning rate, to
optimize performance. Techniques like cross-validation, grid search, or random search can assist in
finding the best hyperparameter values.
10. Validate the model: Once you are satisfied with the model's performance, validate it on new, unseen
data to ensure its generalization ability. This step helps you verify that the model is not overfitting and
can make accurate predictions on real-world data.
11. Interpret and communicate results: Analyze the coefficients and significance of the predictor variables
to understand their impact on the target variable. Interpret the model's results in the context of your
problem and communicate the findings effectively to stakeholders.
 c) Importance of Data Visualization:
Data visualization is the process of displaying data (often in large quantities) in a meaningful fashion
to provide insights that will support bet ter decisions. Making sense of large quantities of disparate
data is necessary not only for gaining competitive advantage in today’s business environment but also
for surviving in it. Researchers have observed that data visualization improves decision-making,
provides managers with better analysis capabilities that reduce reliance on IT professionals, and
improves collaboration and information sharing. Raw data are important, particularly when one needs
to identify accurate values or compare individual numbers. However, it is quite difficult to identify
trends and pat terns, find exceptions, or compare groups of data in tabular form. The human brain
does a surprisingly good job processing visual information—if presented in an effective way.
Visualizing data provides a way of communicating data at all levels of a business and can reveal
surprising patterns and relationships.
1. Enhances data understanding: Visualizing data allows us to comprehend complex datasets more
easily. By representing data visually through charts, graphs, or maps, patterns, trends, and
relationships become more apparent. It helps us grasp the big picture and understand the data at a
glance, leading to quicker and more comprehensive insights.
2. Facilitates data exploration: Data visualization enables exploratory data analysis, allowing analysts to
delve deeper into the data to discover hidden patterns, correlations, and anomalies. Interactive
visualizations provide the ability to filter, drill down, and interact with the data, facilitating deeper
exploration and hypothesis generation.
3. Supports decision-making: Visualizing data aids decision-making by providing a clear and concise
representation of information. Visuals allow decision-makers to understand complex data quickly and
make informed choices. When presented with visual insights, decision-makers can identify trends,
spot outliers, and grasp the implications of different scenarios more easily.
4. Improves communication and storytelling: Visualizations are powerful tools for communicating data
insights to both technical and non-technical audiences. They simplify complex concepts, making data
more accessible and engaging. Visuals can tell a compelling story, helping stakeholders understand
the significance of the data and the implications for the business or organization.
5. Enables effective data-driven presentations: Visualizations are effective for presenting data in
meetings, presentations, and reports. They help convey information in a concise and visually
appealing manner, making it easier for the audience to understand and remember key insights. Visuals
also enable the presenter to highlight important findings, emphasize trends, and support their
arguments effectively.
6. Supports data sharing and collaboration: Visualizations facilitate sharing and collaboration by
providing a common language for discussing data. When multiple stakeholders can see and interact
with the same visual representation of data, it fosters better collaboration, alignment, and decision-
making. Visualizations can be shared across teams, departments, or organizations to promote data-
driven discussions and consensus.
7. Detects patterns and outliers: Visualizing data makes it easier to identify patterns, trends, and outliers
that might be missed in raw data. Visual techniques like scatter plots, box plots, and heatmaps allow
us to detect clusters, correlations, and anomalies visually. This can lead to important discoveries, such
as identifying market segments, uncovering unusual customer behavior, or detecting data quality
issues.
8. Supports data-driven storytelling and persuasion: Humans are visual creatures, and we are naturally
drawn to visuals. By presenting data visually, it evokes emotions, captures attention, and engages the
audience. This can be particularly impactful when trying to persuade or convince others based on
data-driven insights.
d) Data Mining:
Data mining is a rapidly growing field of business analytics that is focused on better understanding
characteristics and patterns among variables in large databases using a variety of statistical and
analytical tools. Many of the tools that we have studied in previous chapters, such as data
visualization, data summarization, PivotTables, correlation and regression analysis, and other
techniques, are used extensively in data mining. However, as the amount of data has grown
exponentially, many other statistical and analytical methods have been developed to identify
relationships among variables in large data sets and understand hidden patterns that they may contain
Some common approaches in data mining include the following:
• Data Exploration and Reduction. This often involves identifying groups in which the elements of the
groups are in some way similar. This approach is often used to understand differences among
customers and segment them into homogenous groups. For example, Macy’s department stores
identified four lifestyles of its customers: “Katherine,” a traditional, classic dresser who doesn’t take a
lot of risks and likes quality; “Julie,” neotraditional and slightly more edgy but still classic; “Erin,” a
contemporary customer who loves newness and shops by brand; and “Alex,” the fashion customer
who wants only the latest and greatest (they have male versions also).4 Such segmentation is useful in
design and marketing activities to better target product offerings. These techniques have also been
used to identify characteristics of successful employees and improve recruiting and hiring practices.
• Classification. Classification is the process of analyzing data to predict how to classify a new data
element. An example of classification is spam filtering in an e-mail client. By examining textual
characteristics of a message (subject header, key words, and so on), the message is classified as junk
or not. Classification methods can help predict whether a credit-card transaction may be fraudulent,
whether a loan applicant is high risk, or whether a consumer will respond to an advertisement.
• Association. Association is the process of analyzing databases to identify natural associations among
variables and create rules for target marketing or buying recommendations. For example, Netflix uses
association to understand what types of movies a customer likes and provides recommendations based
on the data. Amazon.com also makes recommendations based on past purchases. Supermarket loyalty
cards collect data on customers’ purchasing habits and print coupons at the point of purchase based on
what was currently bought.
• Cause-and-effect modelling. Cause-and-effect modelling is the process of developing analytic
models to describe the relationship between metrics that drive business performance—for instance,
profitability, customer satisfaction, or employee satisfaction. Understanding the drivers of
performance can lead to better decisions to improve performance. For example, the controls group of
Johnson Controls, Inc., examined the relationship between satisfaction and contract-renewal rates.
They found that 91% of contract renewals came from customers who were either satisfied or very
satisfied, and customers who were not satisfied had a much higher defection rate. Their model
predicted that a one-percentage-point increase in the overall satisfaction score was worth $13 million
in service contract renewals annually. As a result, they identified decisions that would improve
customer satisfaction.5 Regression and correlation analysis are key tools for cause-and-effect
modeling
 e) PivotTable
A pivot table is a powerful feature in spreadsheet software, such as Microsoft Excel, that allows for
quick summarization and analysis of large datasets. It simplifies the process of aggregating and
organizing data, making it easier to extract meaningful insights. Here's a short note on pivot tables:

A pivot table takes a dataset with multiple rows and columns and reorganizes it into a more compact
and summarized form. It enables users to slice, dice, and analyze data by creating customized reports
and performing multidimensional analysis. Pivot tables offer the following benefits:

1. Summarizing data: Pivot tables provide a simple and efficient way to summarize large datasets. Users
can aggregate and display data by different variables, such as dates, categories, or regions. Common
summary functions include sum, average, count, minimum, and maximum.
2. Cross-tabulation and comparison: Pivot tables allow for cross-tabulation, which means users can
compare data across different dimensions. They can analyze how variables interact with each other,
identify patterns, and gain insights into relationships between variables.
3. Filtering and drilling down: Users can filter the data within a pivot table to focus on specific subsets
of information. This feature enables them to drill down into the details and analyze specific subsets of
data, such as filtering by a particular date range or selecting specific categories.
4. Dynamic and interactive analysis: Pivot tables offer interactivity, allowing users to change the layout,
add or remove variables, and rearrange the summary structure. Users can quickly explore different
perspectives and customize the analysis to suit their needs without altering the underlying data.
5. Visual representation: Pivot tables provide visual representations of data in a tabular format. Users
can easily grasp the summarized information through clear and organized rows and columns.
Additionally, pivot tables can be enhanced with visual elements like conditional formatting, charts,
and sparklines to improve data visualization.
6. Rapid report generation: Pivot tables streamline the process of generating reports. Users can quickly
create customized reports by dragging and dropping variables into rows, columns, and values
sections. The layout and calculations automatically adjust as users modify the pivot table structure.

Pivot tables are widely used in data analysis, reporting, and decision-making across various domains,
including finance, marketing, operations, and human resources. They offer a flexible and efficient
way to analyze and summarize large datasets, enabling users to uncover insights, identify trends, and
make data-driven decisions.
 f) Seasonal and Cyclical effects exhibited in Time Series:
In time series analysis, seasonal and cyclical effects refer to patterns or fluctuations that occur at
specific intervals or over extended periods of time, respectively. These effects are commonly
observed in various economic, financial, and business data. Here's an explanation of seasonal and
cyclical effects exhibited in time series:

1. Seasonal effects: Seasonality refers to patterns that repeat at regular intervals within a year, such as
monthly, quarterly, or yearly cycles. Seasonal effects are often influenced by factors like weather,
holidays, or business cycles. Examples of time series data exhibiting seasonal effects include retail
sales, tourism data, and energy consumption. Some characteristics of seasonal effects include:
 Regularity: Seasonal patterns occur consistently at fixed intervals throughout the year.
 Repeated patterns: Data points tend to follow similar patterns each year, forming peaks and troughs.
 Short-term influence: Seasonal effects are relatively short-term, typically lasting a few periods or
months.
 Predictability: Once a seasonal pattern is identified, it can be used to forecast future values and adjust
for seasonality.
2. Cyclical effects: Cyclical effects represent longer-term fluctuations that occur over a period longer
than a year. These fluctuations are often associated with economic cycles, business cycles, or other
factors impacting a specific industry or sector. Cyclical effects are characterized by the following:
 Irregularity: Cyclical patterns do not repeat with fixed intervals and can vary in length and amplitude.
 Longer-term trends: The duration of cyclical patterns can range from several years to decades.
 Economic factors: Cyclical effects are influenced by factors such as investment, interest rates,
consumer sentiment, and overall economic conditions.
 Varying amplitudes: Cyclical fluctuations can exhibit high amplitudes during economic booms and
low amplitudes during recessions.

It's important to note that seasonal and cyclical effects can coexist within a time series. Separating
these effects from the underlying trend and random fluctuations (noise) is a key step in time series
analysis. Techniques such as seasonal decomposition, moving averages, or econometric models like
autoregressive integrated moving average (ARIMA) or state space models can be used to identify and
account for these effects.

Understanding and accounting for seasonal and cyclical effects in time series analysis is vital for
accurate forecasting, anomaly detection, and decision-making. By recognizing and appropriately
adjusting for these patterns, analysts can improve the accuracy of their predictions and make informed
decisions based on the underlying trends in the data.
 C.
Choose the right alternative

A. A condition occurring when two or more independent variables in the same multiple regression
model contain high level of the same information and can predict each other better than the dependent
variable, signifies

i.Non-linearity
ii.Multicollinearity
iii.Heteroscedasticity
iv.Autocorrelation

B. The core of business analytics consists of three disciplines:

i.Business Intelligence & Information Systems, Statistics and Modeling & Optimization.
ii.Descriptive, Predictive and Prescriptive Analytics.
iii.Modeling, Reliability and Validity.
iv.None of the above.

C. A database is……..

i.a collection of data.

ii.data that comes from experimentation and observation.
iii.a collection of related files containing records on people, place or things.
iv.set of records having certain characteristics.

D. Tool is excel for distilling a complex database into meaningful information is

i.PivotTable
ii.Form Controls
iii.Data Validation
iv.Slicers

E. What is true for Ratio data…..

i.are continuous
ii.have a natural zero point
iii.most business and economic data such as Rupee and Time, fall into this category.
iv.All i. ii. and iii.

F. Which of the following is a relative measure of dispersion and is useful when comparing the
variability of two or more data sets when their scales differ.

i.Variance
ii.Range
iii.Standard deviation
iv.Coefficient of variation
D.
An airline developed a regression model to predict revenue from flights that connect “feeder” cities to
its hub airport. The response in the model is the revenue generated by flights operating to the feeder
cities (in thousands of dollars per month), and the two explanatory variables are the air distance between
the hub and the feeder city (Distance, in miles) and the population of the feeder city (in thousands). The
least squares regression equation based on data for 37 feeder locations last month is Estimated Revenue
= 87 + 0.3 Distance + 1.5 Population with R2 = 0.74 and se = 32.7.
(a) The airline plans to expand its operations to add an additional feeder city. One possible city has
population 100,000 and is 250 miles from the hub. A second possible city has population 75,000 and is
200 miles from the hub. Which would you recommend if the airline wants to increase total revenue?
(b) What is the interpretation of the intercept in this equation?
(c) What is the interpretation of the partial slope for Distance?
(d) What is the interpretation of the partial slope for Population?

(a) To recommend the feeder city that would likely increase total revenue, we can evaluate the
predicted revenue for each city using the regression equation.

For the first possible city: Population = 100,000 Distance = 250 miles

Using the regression equation: Estimated Revenue = 87 + 0.3 * Distance + 1.5 * Population

Estimated Revenue = 87 + 0.3 * 250 + 1.5 * 100 Estimated Revenue = 87 + 75 + 150 Estimated
Revenue = $312,000

For the second possible city: Population = 75,000 Distance = 200 miles

Using the regression equation: Estimated Revenue = 87 + 0.3 * Distance + 1.5 * Population

Estimated Revenue = 87 + 0.3 * 200 + 1.5 * 75 Estimated Revenue = 87 + 60 + 112.5 Estimated

Revenue = $259,500

Based on the predicted revenues, the first city with a population of 100,000 and a distance of 250
miles is recommended as it is expected to generate higher revenue ($312,000) compared to the second
city ($259,500).

(b) The interpretation of the intercept (87) in the regression equation is the estimated revenue when
both Distance and Population are zero. In this context, it represents the revenue from flights operating
at the hub airport without considering any specific feeder city. It includes fixed costs or other revenue
sources not accounted for in the model.

(c) The interpretation of the partial slope for Distance (0.3) is that, on average, for every one unit
increase in the air distance between the hub and the feeder city (in this case, per mile), the estimated
revenue is expected to increase by 0.3 thousand dollars, assuming all other factors remain constant.

(d) The interpretation of the partial slope for Population (1.5) is that, on average, for every one unit
increase in the population of the feeder city (in this case, per thousand people), the estimated revenue
is expected to increase by 1.5 thousand dollars, assuming all other factors remain constant.
Q.

To provide the required information, the t-statistics and p-values can be estimated using the Empirical
Rule. The Empirical Rule is an approximation method based on the standard deviation to estimate the
p-values corresponding to the t-statistics.

(e) To estimate the t-statistics, divide each estimate by its corresponding standard error (SE).

t-Statistic for Intercept = 87.3543 / 55.0459 = 1.587 t-Statistic for Distance = 0.3428 / 0.0925 = 3.704
t-Statistic for Population = 1.4789 / 0.2515 = 5.881

(f) To estimate the p-values using the Empirical Rule, the absolute values of the t-statistics can be
used as approximations for the z-scores. The p-values can then be estimated using the area under the
normal distribution curve.

For a two-tailed test, the rough estimates for the p-values can be approximated as follows:

p-value for Intercept ≈ 2 * (1 - Area under the curve corresponding to a z-score of 1.587) p-value for
Distance ≈ 2 * (1 - Area under the curve corresponding to a z-score of 3.704) p-value for Population ≈
2 * (1 - Area under the curve corresponding to a z-score of 5.881)

(g) To determine the effect of a population growth of 10,000 on average, we can calculate the
corresponding change in estimated revenue by multiplying the population growth by the partial slope
for Population.

Change in revenue = 10,000 * Partial slope for Population

The range can be determined by considering the standard error of the estimate.

Range = Change in revenue ± (1.96 * SE of Population * 10,000)

Note: The critical value of 1.96 corresponds to a 95% confidence level assuming a normal
distribution.