Graded Homework

• Consider the Sherwin-Williams Company example discussed in this chapter. Suppose one is interested in developing a simple regression model with paint sales (Y) as the dependent variable and selling price (P) as the independent variable.

Determine the estimated regression line. The regression equation is given by

Y = b₀ + b₁ X

where Y = dependent variable

X = independent variable

b₀ = Y intercept

b₁ = slope of the regression line

Sales (Y) = b₀ + b_{1 *} price (X)

b. Give an economic interpretation of the estimated intercept (a) and slope (b) coefficients.

c. Test the hypothesis (at the .05 level of significance) that there is no relation-ship (that is, = 0) between the variables.