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:

1. The regression output you generated in Excel.

• Your interpretation of the coefficient of determination (r-squared).

• Your interpretation of the global test for statistical significance (the F-test).

• Your interpretation of the coefficient estimates for all the independent variables.

• Your interpretation of the statistical significance of the coefficient estimates for all the independent variables.

• 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)

• 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.)

• 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.

• 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.

1. 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

1. Your interpretation of the coefficient estimate for Log(AnnualIncome).

1. Your interpretation of the coefficient of determination (r-squared) for this new model.

Written Report

Length requirements: 3 pages minimum (not including Cover and Reference pages)

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