Birzeit University

Faculty of Graduate Studies

MBA Program
Business Administration 636: Managerial Economics

Instructor: Dr. Adel Zagha Student:

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Regression Analysis Exercise 1st Semester 2023/2024

In a study of the demand for Led LG TVs, a researcher is examining the factors that affect the
demand for these TVs in 20 cities. The following data on the number of TVs purchased in these
cities in the same year, personal annual incomes, and the TV prices of a random sample of 20
cities were collected.

Number of Purchased Annual Income (in

City P (in 100 USD)
TVs 000 USD)

1 180 115 10
2 225 150 9
3 210 118 10
4 150 78 12
5 150 80 11
6 60 56 20
7 135 85 11
8 150 90 10
9 150 92 10
10 60 68 22
11 90 88 17
12 90 84 16
13 162 105 14
14 171 125 10
15 153 80 12
16 180 117 10
17 198 138 8
18 189 130 9
19 144 98 11
20 126 90 13
Answer the following questions based on the data using Excel to run a multiple linear
regression.

(A) Given the nature of the problem, which would be the dependent variable and which
would be the independent variables?

(B) Plot the data. Find the correlation coefficients matrix between the variables.

(C) Using the regression facility in Excel, determine and write the equation of the estimated
regression line. Give an economic interpretation of the slope (bs) coefficients. Let b1 the
coefficient of income variable and b2 the coefficient of the price variable.

(D) Test the hypothesis that there is no relationship (i.e. b = 0) between each of the
independent the variables and the dependent variable. For each b state your null
hypothesis and the alternative hypothesis. Are the independent variables statistically
significant?

(E) How much is the coefficient of determination? What does it mean?

(F) Perform an F-test of the overall significance of the results. State your null hypothesis and
the alternative hypothesis.

(G)Based on the regression equation, calculate the price elasticity of demand and the income
elasticity of demand for the LED TVs and classify the product according to your results.

(H) Predict the amount of the LED TVs demanded at the average values of both income and
price, and then construct an approximate 95 percent estimate interval.

(I) Rerun the regression in the non-linear multiple regression form and estimate the equation
of a non-linear demand curve for the LED TVs. Write the estimated regression equation.

(J) Interpret the results of the non-linear regression.

(K)What are the price and income elasticity of demand based on the non-linear regression.

(L) According to the results of the non-linear regression which estimate is stronger: the linear
or the non-linear regression?

(M) What is the potential regression problem in this exercise? Explain your answer!