Return to Exercise 1.7, which gave data on advertising impressions retained and advertising expenditure for a sample of 21 firms. In Exercise 5.11 you were asked to plot these data and decide on an appropriate model about the relationship between impressions and advertising expenditure. Letting Y represent impressions retained and X the advertising expenditure, the following regressions were obtained: a.

Chapter 8, Exerise Questions #32

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Return to Exercise 1.7, which gave data on advertising impressions retained and advertising expenditure for a sample of 21 firms. In Exercise 5.11 you were asked to plot these data and decide on an appropriate model about the relationship between impressions and advertising expenditure. Letting Y represent impressions retained and X the advertising expenditure, the following regressions were obtained:

Model I: Ý, = 22.163 + 0.3631X; se = (7.089) (0.0971) Î; = 7.059 + 1.0847X; – 0.0040X? = 9.986) (0.3699) p2 = 0.424


a. Interpret both models.
b. Which is a better model? Why?
c. Which statistical test(s) would you use to choose between the two models?
d. Are there €œdiminishing returns€ to advertising expenditure, that is, after a certain level of advertising expenditure (the saturation level), does it not pay to advertise? Can you find out what that level of expenditure might be? Show the necessary calculations.


Related Book For answer-question

Basic Econometrics

5th edition

Authors: Damodar N. Gujrati, Dawn C. Porter

ISBN: 978-0073375779