Refer to Exercises 1 and 2. Suppose you believe that the impact of contract cost on web development time is dependent on the type of industry that the company is from.
(a) What is the model equation in this context?
(b) What null hypothesis would you test to determine that the nature of the impact of contract cost on web development time does not depend on the type of industry?
(c) Based on historical data, you believe that web development time increases at a faster rate as the contract cost increases. Write down the equation of the model.
Exercise 1
Refer to Exercise 2. What null hypothesis would you test to determine if contract cost is significant in the presence of the other independent variables? What null hypothesis would you test to determine if the number of projects undertaken could be dropped from the model?
Exercise 2
An information technology company that specializes in website development is interested in modeling development time as a function of the contract cost, number of available developers, and number of projects undertaken.
(a) Write down the equation of the model and explain the meaning of the model parameters in the context of the problem.
(b) What signs do you expect of the model parameters? Explain.
(c) Do you suspect multicollinearity (strong relationship) among the independent variables? If so, among which variables? What measures might you take to reduce the impact of multicollinearity?
(d) Suppose you had built a model to predict development time based only on the contract cost. What might be some disadvantages of this model?