You have been retained by a regional food marketer, FoodKing, to forecast the demand for small cakes that are mass-produced and marketed under the name Big Suzy’s. Attached is the Data Set as well as...

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Mr. Alpha: “looking at the data, I see that the amount of pies we sell varies from market to market and quarter to quarter. How good is your model at explaining that variation? Is there any way to measure how much of that variation is explained?” Ms. Beta: “Well your model might help us predict for this dataset, but when I took statistics in my MBA program, they told us to make sure the model is statistically significant –usually at the 5% level. Is your model significant at that level? I know what Mr. Alpha asked, but does your answer to him guarantee significance for me?” Mr. Cappa: “Well, I’ve been around the block before and all this math doesn’t mean anything unless you can explain it to me in “plain English.” I see you underlined that coefficient on price? In “plain English” what does that coefficient mean? How do we know that price does help explain the number of cakes I sold?” Ms. Beta: “…and is it significant or does it just fit this data set?” Mr. Alpha: “Okay, but –I’ve always thought that our customer’s income really drove sales. I mean, it looked to me like we never sold as many pies in the less affluent markets. Is that true? Does your model help us understand that?” Ms. Beta: “…and is the “income effect” significant?” Mr. Cappa: “Our EVP has been talking about expanding into

new market. In this market, the population is 2,550,000, the average income is $41,500 and the competitor’s product sells for $4.75. Based on your model, if we price our product at $5.25, how many cakes will we sell?” Ms. Beta: “In my MBA program, we always talk about whether demand was elastic or inelastic. If we price our product at $5.25, what would be the price elasticity of demand for our product at that price? Is this elastic or inelastic?” Mr. Cappa: Forget all that elasticity stuff –that won’t be of any help. What I need to know is if I am pricing the product right. If we raised the price of the product by a very small amount, would the...