Exhibit 18.6.Based on quarterly data collected over the last 5 years,the following regression equation was found to forecast the quarterly demand for the number of new copies of a business statistics textbook: , where Qtr1,Qtr2 and Qtr3 are dummy variables corresponding to Quarters 1,2 and 3,and t = time period.
Refer to Exhibit 18.6.For a given year,the demand in Quarter 4 is on average
A)741 copies higher than in Quarter 1.
B)663 copies higher than in Quarter 1.
C)741 copies lower than in Quarter 1.
D)663 copies lower than in Quarter 1.

Question

Exhibit 18.6.Based on quarterly data collected over the last 5 years,the following regression equation was found to forecast the quarterly demand for the number of new copies of a business statistics textbook:  , where Qtr1,Qtr2 and Qtr3 are dummy variables corresponding to Quarters 1,2 and 3,and t = time period.
Refer to Exhibit 18.6.For a given year,the demand in Quarter 4 is on average
A)741 copies higher than in Quarter 1. 
B)663 copies higher than in Quarter 1. 
C)741 copies lower than in Quarter 1. 
D)663 copies lower than in Quarter 1.

Quizplus · Accepted Answer

From the given regression equation, the coefficient of Qtr4 is -741, indicating that the demand in Quarter 4 is on average 741 copies lower than in Quarter 1. Therefore, option C is incorrect. To obtain the demand in Quarter 4, we need to add the coefficient of Qtr4 to the intercept (52,813), which gives us 52,813 - 741 = 52,072. On the other hand, the coefficient of Qtr1 is 0, which means that Quarter 1 is the reference period. Therefore, the demand in Quarter 4 is on average 741 copies lower than in Quarter 1. Thus, option B is also incorrect. Hence, the correct answer is option A, 741 copies lower than in Quarter 1.