Electric IQ is a software company that develops systems for managing electricity use. The company has been successful, reaching $25 million in sales after its fourth year of operations. Now the company is considering a new product line that would focus on the newly developing renewable energy sources such as wind power. To examine the potential for this new product line, the company developed a model to forecast the demand for renewable energy. In identifying the independent variables for its forecasting model, the company decided to identify the key drivers of demand for renewable energy. The drivers were identified in two levels. The first-level drivers (social opinion and political action) contributed directly to the demand for renewable energy, while the second- level drivers contributed to the first-level drivers, and therefore indirectly contributed to the demand for renewable energy. For example, the reporting on climate change, the technical viability of the renewable energy, and the cost of renewable energy influenced social opinion, which in turn influenced the demand for renewable energy. The drivers identified initially by Electric IQ are as follows:

Required:
Assume that you are advising Electric IQ on developing a regression model for forecasting the demand for renewable energy. Discuss how you would measure the dependent and independent variables.

Level 1 Drivers Level 1 and Level 2 Drivers Social Opinion Climate change data Technical viability Cost Political Action Governmental subsidies Regulations Tax benefits Level 2 Drivers