Assignment Overview
You are a consultant who works for the Diligent Consulting Group. In this Case, you are engaged on a consulting basis by Loving Organic Foods. In order to get a better idea of what might have motivated customers’ buying habits you are asked to analyze the factors that impact organic food expenditures. You performed a simple linear regression analysis in the Module 3 Case. Now, you are adding a layer of complexity to that analysis and including more independent variables in your model.
Using Excel, generate regression estimates for the following model:
Annual Amount Spent on Organic Food = α + b1Age + b2AnnualIncome
+ b3Number of People in Household + b4Gender
After you have reviewed the results from the estimation, write a report to your boss that interprets the results that you obtained. Please include the following in your report:
- The regression output you generated in Excel.
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- Your interpretation of the coefficient of determination (r-squared).
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- Your interpretation of the global test for statistical significance (the F-test).
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- Your interpretation of the coefficient estimates for all the independent variables.
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- Your interpretation of the statistical significance of the coefficient estimates for all the independent variables.
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- The regression equation with estimates substituted into the equation. (Note: Once the estimates are substituted into the regression equation, it should take a form similar to this: y = 10 +2x1 +1x2 +4x3 +0.9x4)
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- An estimate of “Annual Amount Spent on Organic Food” for the average consumer. (Note: You will need to substitute the averages for all the independent variables into the regression equation for x, the intercept for α, and solve for y.)
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- A discussion of whether or not the coefficient estimate on the Age variable in this estimation is different than it was in the simple linear regression model from Module 3 Case. Be sure to explain why it did/did not change.
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- You decide you want to generate an elasticity coefficient, so you log the following variables in Excel: Annual Amount Spent on Organic Food, Annual Income.
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- Using Excel, generate regression estimates for the following model:
Log(Annual Amount Spent on Organic Food) = α +b1Age + b2Log(AnnualIncome)
+ b3Number of People in Household + b4Gender
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- Your interpretation of the coefficient estimate for Log(AnnualIncome).
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- Your interpretation of the coefficient of determination (r-squared) for this new model.
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Written Report
Length requirements: 3 pages minimum (not including Cover and Reference pages)
