Assume you are an economist working for Wal-Mart in Chicago. You are considering
ID: 1107077 • Letter: A
Question
Assume you are an economist working for Wal-Mart in Chicago. You are considering locations to open the newest stores. In order to identify optimal locations, you have estimated a sales model based on 100 stores currently operating in Arkansas. The equation below explains total annual sales as a function of city population where the store is located, number of other similar retail outlets in the same area, and per capital income in the city (per capita income is the total income divided by the population ie. income per person).
Which variables in your sales model are staistically sgnificant? Please interpret the economic significance of the coefficients as well.
Total Sales, = 10,000 + 57-CityPopulation,-23,200 * 0therRetail, + 0.8 * PerCapitalncome, 120.1) 12.) (60.9) (0.5)Explanation / Answer
in the sales model the variable
CityPopulation tells that if the population increases by 1 on an average the total sales increases by 5.7 units. The variable is significant as the t- value reported is greater than 2.01 nthe critical t at 55 level of significance.
Other Retail tells us that if the competing stores increases by 1 the total sales on a an average decreases by 23200. The variable is statistically significant as the t- value reported is very high.
PerCapitaIncome tells that if the per capita income increases by 1 then total sales on an average increases by 1. From the t-value reported in the reuts the variable is not significant.