Question

Now that we have our linear regression model, let’s try to make a prediction for the sales given a new set of advertising budgets as follows: new.dat <- data.frame(TV=200, Radio=10, Newspaper=20) You are required to report the predicted sales as well as the lower and upper bound for the 95% prediction interval. What will you report?

Answer 1

The predicted sales for the new set of advertising budgets is 14.

Explanation:

The linear regression model is:

`\text{Sales}=2.9389+0.0458\cdot(\text{TV})+0.1885\cdot(\text{Radio})-0.0010\cdot(\text{Newspaper})`

Compute the value of sales for:

TV = 200,

Radio = 10,

Newspaper = 20

`\text{Sales}=2.9389+0.0458\cdot(\text{TV})+0.1885\cdot(\text{Radio})-0.0010\cdot(\text{Newspaper})`

`=2.9389+0.0458\cdot(200)+0.1885\cdot(10)-0.0010\cdot(20)\\=2.9389+9.16+1.885-0.0002\\=13.9837\\\approx 14`

Thus, the predicted sales for the new set of advertising budgets is 14.