We know that regression analysis relates to the correlation rather than causation between variables. A critical step in this analysis is the selection of the variables to be related. If you do not select the most relevant variables the results would likely not be very useful in making a business decision.
Read and study the following scenario and then respond to the assignment criteria.
You own a hotdog stand outside of a major college football stadium. You have been at the same location for 5 years and your competitors remain the same. Your pricing strategy also remains the same. Your margins are thin and as such if you do not sell the hotdogs you cooked you lose money, and if you do not cook enough hotdogs to meet demand you lose revenue.
Your task then is to determine how many hotdogs you should prepare for each game. You decide to use regression analysis based on historical data to project how many hotdogs you should prepare. The critical decision is to select the most relevant variables that impact how many hotdogs you sell during a game.
Write responses to the following:
1. Start by recognizing that the dependent variable is the number of hotdogs sold.
2. Identify at least 4 possible independent variables that might influence the dependent variable, and explain how each variable might correlate to the dependent variable.
3. From the 4 possible independent variables select the two most relevant variables and explain why they are more relevant than the two you did not select.
4. Finally, describe how these two variables would be correlated to the dependent variable and could there be any correlation between these two independent variables.