Operations Management

Question

Chicken Palace periodically offers carryout five-piece chicken dinners at special prices. Let Y be the number of dinners sold and X be the price.

 

Price

Dinners sold

$3

760

$3.5

510

$2

980

$4

400

$4.5

320

$5

300

 

  • a)Based on the historical observations in the above table, determine the regression equation.
  • b)What is the model’s correlation coefficient? Comment on the strength of the relationship between the price and the number of dinners.
  • c)Apply a 10% increase to the price point of $4.5 and calculate the predicted number of dinners sold at this new price. Compare this predicted sale with the current sale for the $4.5 price point and interpret the impact of this specific price increase on sales. 
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