Let Y t be the sales during month t (in thousands of dollars) for a photography studio, and let P…
Let Yt be the sales during month t (in thousands of dollars) for a photography studio, and let Pt be the price charged for portraits during month t. The data are in the file P14_50.xlsx.
a. Use regression to fit the following model to these data: Yt = α + b1Pt + b2Yt-1. This says that current sales are related to current price and sales in the previous month.
b. If the price of a portrait during month 21 is $30, what would you predict for sales in month 21?