North South University

School Of Business and Economics

BUS 525: Managerial Economics

Section: 05

Semester: Spring 2021

Assignment 1 and data analysis exercise

Submitted To

Dr. K. M. Zahidul Islam

Submitted By

Janiva Sultana
Id: 2016269660

Date of submission: 12th of April 2021

Excel file:1
Forecasting demand:

Trend Analysis Plot for Q

Linear Trend Model
Yt = 47.86 + 4.290×t
110 Variable
Actual
Fits
100 Forecasts

Accuracy Measures
90 MAPE 6.5651
MAD 4.5565
MSD 33.3505
80
Q

70

60

50

40
Jan Mar May Jul Sep Nov Jan
Month

————— 4/2/2021 11:24:11 AM ————————————————————

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Trend Analysis for Q

Data Q
Length 12
NMissing 0

Fitted Trend Equation

Yt = 47.86 + 4.290×t

Accuracy Measures

MAPE 6.5651
MAD 4.5565
MSD 33.3505
Forecasts

Period Forecast
Jan 103.636
Feb 107.927

Answer:
Demand function =47.86 + 4.290*t
Forecasted demand for the month of January is 103.636
Forecasted demand for the month of February is 107.927

-------------------------

Excel file: 2
Advertisement expenses impact:

————— 4/2/2021 12:44:24 PM ————————————————————

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Regression Analysis: SALES versus ADEXP

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 1 1257182986 1257182986 16.30 0.010
ADEXP 1 1257182986 1257182986 16.30 0.010
Error 5 385674157 77134831
Lack-of-Fit 4 273174157 68293539 0.61 0.731
Pure Error 1 112500000 112500000
Total 6 1642857143

Model Summary

S R-sq R-sq(adj) R-sq(pred)

8782.64 76.52% 71.83% 56.97%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 11573 7151 1.62 0.166
ADEXP 4.97 1.23 4.04 0.010 1.00

Regression Equation
SALES = 11573 + 4.97 ADEXP

Answer:

Hypothesis:
Let,
H0= advertisement expense has no significant impact on sales
H1= advertisement expense has significant impact on sales

Regression equation:
Sales = 11573+4.97 ADEX

Here, we can see that p-value is less than 0.05, and for this we will reject null hypotheses. It
means that advertisement has significant or positive impact on sales.
And in terms of t-value, it is positive that is why we will reject the null hypotheses. This
indicates advertisement has positive or significant impact on sales.

Fitted Line Plot

SALES = 11573 + 4.972 ADEXP
S 8782.64
60000
R-Sq 76.5%
R-Sq(adj) 71.8%

50000

40000
SALES

30000

20000

10000
2000 3000 4000 5000 6000 7000 8000 9000
ADEXP

------------------------------------
Excel file: 3
Forecasting:

Trend Analysis Plot for Income ($)

Linear Trend Model
Yt = 5963.4 + 182.64×t
12000 Variable
Actual
Fits
11000 Forecasts

Accuracy Measures
10000 MAPE 2.1
MAD 178.3
Income ($)

MSD 47493.7
9000

8000

7000

6000

1994 1999 2004 2009 2014 2019 2024

Year

————— 4/3/2021 11:46:00 AM ————————————————————

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Trend Analysis for Income ($)

Data Income ($)

Length 27
NMissing 0

Fitted Trend Equation

Yt = 5963.4 + 182.64×t

Accuracy Measures
MAPE 2.1
MAD 178.3
MSD 47493.7

Forecasts

Period Forecast
2021 11077.3
2022 11260.0
2023 11442.6
2024 11625.2
2025 11807.9

Trend Analysis Plot for Income ($)

————— 4/3/2021 11:59:20 AM ————————————————————

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Regression Analysis: Income ($) versus P, B

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 2 52301325 26150662 173.36 0.000
P 1 34549096 34549096 229.04 0.000
B 1 8111769 8111769 53.78 0.000
Error 24 3620260 150844
Total 26 55921584

Model Summary

S R-sq R-sq(adj) R-sq(pred)

388.387 93.53% 92.99% 91.77%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant -231 803 -0.29 0.776
P 74.71 4.94 15.13 0.000 1.05
B 56.22 7.67 7.33 0.000 1.05

Regression Equation

Income ($) = -231 + 74.71 *55 + 56.22 *110

Fits and Diagnostics for Unusual Observations

Income
Obs ($) Fit Resid Std Resid
20 9829 10632 -803 -2.29 R
 26 10625 9768 857 2.31 R
27 10905 9731 1174 3.15 R
R Large residual

Answer
Forecasted income of Mr. X for the next five years is:

Period Forecast
2021 11077.3
2022 11260.0
2023 11442.6
2024 11625.2
2025 11807.9

If B=110 and P=55, then the income will be (= -231 + 74.71*55 + 56.22*110) = 10,062.25

----------------------

Excel file:4
Estimation:

————— 4/3/2021 12:19:43 PM ————————————————————

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Regression Analysis: Qd versus Price

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 1 374.53 374.533 45.77 0.000
Price 1 374.53 374.533 45.77 0.000
Error 8 65.47 8.183
Lack-of-Fit 5 21.47 4.293 0.29 0.890
Pure Error 3 44.00 14.667
Total 9 440.00

Model Summary

S R-sq R-sq(adj) R-sq(pred)

2.86065 85.12% 83.26% 80.20%
Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 7.60 6.33 1.20 0.264
Price 3.533 0.522 6.77 0.000 1.00

Regression Equation

Qd = 7.60 + 3.533 * 20

Answer:

Hypothesis:
Price has no impact on quantity = H0
Price has impact on quantity = H1

Here,
P value is less than 0.05 so; we will reject the null hypotheses. That means price has positive
impact on quantity.

T value is positive. This indicates that price has positive impact on quantity.

If price is 20 then,
Qd = 7.60+ 3.533*20 = 78.26 unit
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Excel file: 5
Auto insurance premium:

————— 4/4/2021 5:19:02 PM ————————————————————

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Regression Analysis: COSTS versus PREMIUMS, CLAIMS

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 2 4184066 2092033 4.85 0.022
PREMIUMS 1 3541112 3541112 8.21 0.011
CLAIMS 1 2142693 2142693 4.97 0.040
Error 17 7332278 431310
Total 19 11516345
Model Summary

S R-sq R-sq(adj) R-sq(pred)

656.742 36.33% 28.84% 4.50%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 7406 696 10.64 0.000
PREMIUMS 28.19 9.84 2.87 0.011 7.63
CLAIMS -281 126 -2.23 0.040 7.63

Regression Equation

COSTS = 7406 + 28.19 PREMIUMS - 281 CLAIMS

Fits and Diagnostics for Unusual Observations

Std
Obs COSTS Fit Resid Resid
1 10197 9672 525 1.18 X
20 9803 8237 1566 2.61 R

R Large residual
X Unusual X

Answer:
Hypothesis:

Number of claims and premiums have no impact on insurance cost= H0

Number of claims and premiums have impact on insurance cost = H1

Regression Equation:

COSTS = 7406 + 28.19 PREMIUMS - 281 CLAIMS

T-test 
Degree of freedom = 20-2-1= 17 
Critical value at 5% level=2.11 
Here, the calculated t value of claims is -2.23 and premiums t value is 2.84. Both are more
than critical value of 2.11, so null hypothesis (H0: Number of claims and premiums has no
significant impact on insurance cost) is rejected and we can say that number of claims and
premiums has a significant impact on insurance cost. 
P- Value: As p value of claims and premiums are less than 0.05, we can reject the null
hypothesis.
 -------------------------------
Pdf file:
4.14
————— 4/7/2021 2:00:38 PM ————————————————————

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a)Regression Analysis: income versus age

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 1 455.4 455.39 6.00 0.025
age 1 455.4 455.39 6.00 0.025
Error 18 1365.0 75.84
Lack-of-Fit 13 830.5 63.89 0.60 0.790
Pure Error 5 534.5 106.90
Total 19 1820.4

Model Summary

S R-sq R-sq(adj) R-sq(pred)

8.70836 25.02% 20.85% 7.27%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 9.93 6.22 1.60 0.128
age 0.359 0.146 2.45 0.025 1.00

Regression Equation

income = 9.93 + 0.359 age

Fits and Diagnostics for Unusual Observations

Std
Obs income Fit Resid Resid
20 48.30 31.47 16.83 2.11 R

R Large residual

Answer:
Hypothesis: 

H0: Age has no significant impact on income

H1: Age has significant impact on income 

Regression equation: Income = 9.93 + 0.359 Age 

T-test 
Degree of freedom, DF= 20-1-1= 18 

Critical value at 5% level=2.101 

Calculated t value 2.45 is more than the critical value, we can reject the null hypothesis (H0:
Age has no significant impact on income) and we can say that, age has significant impact on
income. 
Coefficient of determination, R   2

Here, R² = 25.02% means about 25.02% variation in income is explained by the variation of age
and rest of the 97.98% variation is unexplained that may be due to some other factors. 
Age coefficient = +0.350; there is positive relationship between age and income means income
increase with age. 

————— 4/7/2021 2:04:47 PM ————————————————————

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b)Regression Analysis: income versus age, education, job exp.

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 3 1591.37 530.46 37.05 0.000
age 1 53.14 53.14 3.71 0.072
education 1 1124.00 1124.00 78.51 0.000
job exp. 1 236.87 236.87 16.55 0.001
Error 16 229.06 14.32
Total 19 1820.43

Model Summary

S R-sq R-sq(adj) R-sq(pred)

3.78368 87.42% 85.06% 78.66%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant -7.06 3.37 -2.10 0.052
age -0.211 0.110 -1.93 0.072 2.98
education 2.245 0.253 8.86 0.000 1.71
job exp. 1.024 0.252 4.07 0.001 2.51

Regression Equation

income = -7.06 - 0.211 age + 2.245 education + 1.024 job exp.

Fits and Diagnostics for Unusual Observations

Obs income Fit Resid Std Resid

4 8.80 16.85 -8.05 -2.25 R

R Large residual

Answer:   
Hypothesis: 

H0: There is no significant impact of education, job experience and age on income

H1: There is no significant impact of education, job experience and age on income

Regression equation:  

Income = -7.06 + 2.245 Education + 1.024 Job Experience - 0.211 Age 

T-value of education = 8.86 

T-value of job experience = 4.07 
T-value of age = -1.93 
Here,  
Degree of freedom, DF = 20-3-1 = 16 
Critical value at 5% level = 2.120 
Calculates t value is greater than critical value of Education and Job Experience, so we can say
that Education and Job Experience have a significant impact on Income. On the other hand, age
has no impact on Income. So we can reject null hypothesis.

Coefficient of determination, R   2

R = 87.42% means about 87.42% variation in income is explained by the variation of Education,
2

Job Experience, age and rest of the 12.58% variation is unexplained that may  be due to some
other factors. 
In part (a), the t value of age is 2.45 that is more than the critical value 2.101 which means age
has significant impact on income. But in part (b), the t value of age is 1.93 that is less than the
critical value 2.120 which means age has no significant impact on income.

c) Given that a person has 

Education = 14 years 
Job Experience = 10 years  
Age = 45 years 
From part (b) we find that
Income = -7.06 + 2.245 Education + 1.024 Job Experience - 0.211 Age =
-7.06 + (2.245 × 14) + (1.024 × 10) – (0.211 × 45) 
= 25.115 

Ans: The person has 25.115-thousand-dollar income. 

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4.15
————— 4/7/2021 2:32:43 PM ————————————————————

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Regression Analysis: grade point avg versus IQ

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 1 2.701 2.7014 23.38 0.001
IQ 1 2.701 2.7014 23.38 0.001
Error 10 1.155 0.1155
Total 11 3.857

Model Summary

S R-sq R-sq(adj) R-sq(pred)

0.339893 70.04% 67.05% 61.68%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant -4.17 1.42 -2.94 0.015
IQ 0.0550 0.0114 4.84 0.001 1.00

Regression Equation

grade point avg = -4.17 + 0.0550 IQ

Fits and Diagnostics for Unusual Observations

grade
Obs point avg Fit Resid Std Resid
2 2.200 2.917 -0.717 -2.23 R

R Large residual
Answer: 
Hypothesis: 

H0: IQ has no significant impact on grade point average 

H1: IQ has significant impact on grade point average 

a) Regression Equation: 

Grade Point Average = -4.17 + 0.0550 IQ 

T-test: 
Degree of Freedom=12-1-1= 10  
Critical value at 5% level= 2.228 
Here, calculated t value is 4.85 which is more than critical value. So, we can reject the
null hypothesis (H0: IQ has no significant impact on Grade Point Average) and can say that IQ
has a significant impact on Grade Point Average. 

Coefficient of determination: R  2

R² = 70.04% means about 70.04% variation in Grade Point is explained by the variation  of IQ
and rest of the 29.96% variation is not explained that may be due to some other  factors. 
The result is consistent with my prior expectations because according to my opinion GPA is
depended on IQ, they are positively correlated. The result also shows the same finding.

b) Forecasting the Grade Average for students: 

When IQ = 120, Grade Point Average = - 4.17 + (0.0550 × 120) = 2.43 When
IQ = 150, Grade Point Average = - 4.17 + (0.0550 × 150) = 4.08

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4.16

————— 4/7/2021 2:14:29 PM ————————————————————

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Regression Analysis: Consumption versus prev consumption, GNP, Price

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 3 177631 59210.4 333.86 0.000
prev consumption 1 6078 6077.9 34.27 0.000
GNP 1 175 174.8 0.99 0.342
Price 1 197 197.0 1.11 0.315
Error 11 1951 177.4
Total 14 179582

Model Summary

S R-sq R-sq(adj) R-sq(pred)

13.3174 98.91% 98.62% 98.10%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 96.1 43.4 2.22 0.049
prev consumption 0.834 0.142 5.85 0.000 23.77
GNP 0.0649 0.0654 0.99 0.342 215.21
Price -25.9 24.5 -1.05 0.315 123.71

Regression Equation

Consumption = 96.1 + 0.834 prev consumption + 0.0649 GNP - 25.9 Price

Fits and Diagnostics for Unusual Observations

Obs Consumption Fit Resid Std Resid

6 555.00 578.32 -23.32 -2.07 R

R Large residual
Answer: 
Hypothesis: 

H0: There is no significant impact of GNP, price and previous year’s consumption on

consumption

H1: There is significant impact of GNP, price and previous year’s consumption on

consumption

a) Here, 
Consumption equation = 96.1 + 0.834 prev consumption + 0.0649 GNP - 25.9 Price

Coefficient of determination, R   2

R = 98.91%, means 98.9% variation in consumption is explained by GNP, price and  previous
2

year consumption and rest of the 1.09% is unexplained due to some other factors. T-statistics 
T-value of GNP= 0.99  
T-value of price= -1.05 
T-value of Previous year consumption (PY)= 5.85 
The signs of estimated coefficients consistent with relationship between
dependent variable and independent variable and later it will help to identify product type.
Degree of freedom, DF= 15-3-1= 11 
Critical value at 5% level=2.201 

Here, t-value of previous year electricity consumption is 5.85 that are higher than
the critical value. So, the coefficients of previous year electricity consumption
are statistically significant at the 0.05 level. 

Coefficients 

Coefficient of GNP = 0.0649; As P value is 0.342, so it has no significant.  

Coefficient of Price= 25.9; as P value is 0.315 that is more than 0.05, so it has
no significant. 
Coefficient of previous year consumption = 0.834; As P value is less than 0.05 it is highly
significant. 
So, coefficient of previous year consumption has significant at the 0.05 level.

b) As in 1984, GNP was $3661.3 and price of electricity was 7.16cents, from part

(a) we find that, 

Consumption equation = 96.1 + 0.0649 GNP - 25.9 Price + 0.834 PY Electricity

consumption for 1984 = 96.1+0.0649*3661.3-25.9*7.16+ 0.834* 750.9= 774.52 
Electricity consumption for 1984 is 774.52 billion of kilowatts per hour.

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4.17
————— 4/7/2021 2:10:56 PM ————————————————————

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Regression Analysis: lnHC versus lnHP, ln Income, ln Hot Dog Price

Analysis of Variance

Source DF Adj SS Adj MS F-Value P-Value

Regression 3 0.628924 0.209641 151.44 0.000
lnHP 1 0.020570 0.020570 14.86 0.005
ln Income 1 0.007797 0.007797 5.63 0.045
ln Hot Dog Price 1 0.000525 0.000525 0.38 0.555
Error 8 0.011075 0.001384
Total 11 0.639999

Model Summary

S R-sq R-sq(adj) R-sq(pred)

0.0372068 98.27% 97.62% 95.62%

Coefficients

Term Coef SE Coef T-Value P-Value VIF

Constant 0.97 1.83 0.53 0.610
lnHP -2.210 0.573 -3.85 0.005 17.72
ln Income 1.434 0.604 2.37 0.045 16.28
ln Hot Dog Price 0.500 0.811 0.62 0.555 42.75

Regression Equation

lnHC = 0.97 - 2.210 lnHP + 1.434 ln Income + 0.500 ln Hot Dog Price

(a) Regression Equation

LNHCONSUMP = 0.97 -2.210 InHP +1.434InINC +0.500INHDPRICE

T Statistics (Calculated T Value): -3.85 (INHPRICE), 2.37 (ININC) and 0.62

(INHDPRICE)

Co-efficient of determination= 97.62% (value from adjusted R square).

Here, 97.62% variation in consumption is explained by the variations of Hamburger

Price, Income and Hotdog price, whereas 2.38% is unexplained.

Formal T Test

If t calculated value >t critical value, we reject the null hypotheses (H0).

H0 (Null): Hamburger price/Income/Hotdog price has no impact on Hamburger consumption.

H1: Hamburger price/Income/Hotdog price has impact on Hamburger consumption.

Degrees of freedom= n-k-1= 12-3-1=8

When DF is 8, critical value at 5% significance level is 2.31(from table value).

Ham burger Price: T value -3.85 is less than T critical value (2.31); we cannot reject null
hypotheses (H0).

Income: T value (2.37) is greater than T critical value (2.31), so we can reject null hypotheses.

Hotdog Price: T value (0.62) is less than T critical value (2.31), so we cannot reject null
hypotheses.

P value Test:
Ham Burger Price: It is statistically significant (0.005<0.05).

Income: It is statistically significant (0.045<0.05).

Hotdog Price: It is statistically insignificant (0.555>0.05).

Decision: Hamburger price and income are statistically significant at 0.05 levels.

Hamburger price and income have impact on hamburger consumption.

b) By using IN on both sides, we get price elasticity of demand, -2.210 that means,

Product is normal, that means, 1% decrease in price results in 2.210% increase in

Quantity demanded and by taking absolute value (2.21>1), it is elastic demand.

Income Elasticity is 1.434, which is positive and greater than 1 refers to luxury goods. This can
be interpreted as, 1% increase in income will have more than 1% (1.434%) increase in demand
for the goods. Cross elasticity is 0.500, this is positive value referring to substitute product.

That means, 1% increase in hotdog price will cause 0.5% increase in demand for hamburger.
Because, the magnitude of relationship with price of hamburger is stronger, and price and
consumption of hamburger are negatively related.

If price decreases by 1% then the demand increases by 2.21% that means if the price of
hamburger decreases, then the demand for hamburger increases and thus consumption increases.
Thus, the cross elasticity is consistent with economic theory.

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