Columbia Gas Company of Ohio distributes natural gas to residential, business, and industrial customers in Ohio. In order to secure enough gas supply, Columbia Gas forecasts daily demand for the next five days using regression. It has identified the average daily temperature as the most important explanatory variable for daily demand for natural gas. The regression is estimated using daily data from the past two years. For brevity, we consider only a subset of this period as follows.
a. Plot tire average temperature and demand data for the past 10 days. Does there appear to be a linear relationship?
b. Estimate the regression coefficients. (You may use Excel's “=slope(RangeY, RangeX)’’ and “=intercept(RangeY, RangeX)” to obtain the regression coefficients b and a, respectively, where RangeY is the range of Excel cells containing they values and RangeX is the range of Excel cells containing the x values.).
c. If the average temperature tomorrow is expected to be 54 degrees Fahrenheit, what is the forecast for demand for natural gas tomorrow?