Let Yt be the sales during month t

Let Y_t be the sales during month t (in thousands of dollars) for a photography studio, and let P_t be the price charged for portraits during month t. The data are in the attachment below. Use regression to fit the following model to these data: Y_t = a + b1Y_t?1 + b2P_t + e_t

This equation indicates that last month’s sales and the current month’s price are explanatory variables. The last term, e_t, is an error term. a. If the price of a portrait during month 21 is $10, what would you predict for sales in month 21? b. Does there appear to be a problem with autocorrelation of the residuals?

Sales
$400,000
$1,042,000
$1,129,000
$1,110,000
$1,336,000
$1,363,000
$1,177,000
$603,000
$582,000
$697,000
$586,000
$673,000
$546,000
$334,000
$27,000
$76,000
$298,000
$746,000
$962,000
$907,000 Price
$15
$12
$24
$18
$18
$30
$27
$24
$36
$27
$24
$27
$30
$33
$24
$27
$30
$18
$21
$24