37 High-low method; regression analysis. (CIMA, adapted) Catherine McCarthy, sales manager of Baxter Arenas, is checking to see if there is any relationship between promotional costs and ticket rev- enues at the sports stadium. She obtains the following data for the past 9 months: Month April May June July August September October November December Ticket Revenues $200,000 270,000 320,000 480,000 430,000 450,000 540,000 670,000 751,000 Promotional Costs $52,000 65,000 80,000 90,000 100,000 110,000 120,000 180,000 197,000 She estimates the following regression equation: Ticket revenues = $65,583 + ($3.54 x Promotional costs) 1. Plot the relationship between promotional costs and ticket revenues. Also draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line. 2. Use the high-low method to compute the function relating promotional costs and revenues. 3. Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional costs within the relevant range? Which method should Catherine use to predict the effect of promotional costs on ticket revenues? Explain briefly