If the price of a portrait during Month 21 is $10, what would you predict for sales in Month 21?Does there appear to be a problem with auto correlation of the residual? Explain your answer.

Multiple Regression

Let Yt be the sales during month t (in thousands of dollars) for a photography studio. Let Pt be the price charged for the portraits during month t. The data will be in the file named week 4 assignment chapter 12 problem that is attached. Use regression to fit the following model to these data:

Yt = a + b1Yt−1 + b2Pt + et

This equation indicates that last month’s sales and the current month’s price are explanatory variables. The last term, et, is an error term.

For your assignment, complete the following:

Part A: If the price of a portrait during Month 21 is $10, what would you predict for sales in Month 21?

Part B: Does there appear to be a problem with auto correlation of the residual? Explain your answer.

In your Excel spreadsheet,

Utilize the regression model.

Utilize the support tool of Excel.

Predict sales as described in Part A.

Explain any problem as described in Part B