Q1) Clothing company executive studied relationship between money spent on marketing and sales volume, by using data on 32 firms in her industry. Variable mktgpis defined as marketing expenditures as percentage of sales. Variable salesm is sales measured in millions of Euros. Variable profp is profit as percentage of sales. Following results were obtained,

mktgpis = 0.47 + 0.32log(salesm) + 0.05profp

Where standard errors are as follows:

(1.37) standard error for intercept of .47,

(0.22) standard error for the .32 coefficient on log (salesm)

(0.05) standard error for the .05 coefficient on profp

The R² for this equation was 0.099

Part A: Interpret coefficient on log (salesm). If salesm were to be increased by 20%, what would be estimated change in mktgp? Would this effect be substantive?

Part B: Test hypothesis that mktgp intensity does not change with salesm, against alternative that it does. Test at 5% level and then at 10% level.

Part C: Test joint null hypothesis that neither log(salesm) or profp affect mktgp.