Hawkeye Pierce, Inc., finds in a simple regression analysis that demand increases with an increase in advertising, and falls as advertising expenditures are reduced. Similarly, a simple regression analysis of product demand and price reveals that demand increases with a decrease in average price, and falls as prices are raised. Coefficient estimates for each independent variable are statistically significant, as is the level of overall explanation achieved, as revealed by the coefficient of determination (R2). However, when both advertising and price are included as independent variables in a multiple regression model, neither variable has a statistically significant coefficient estimate.
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