A marketing analyst wants to examine the relationship between sales (in $1,000s) and advertising (in $100s) for firms in the food and beverage industry and so collects monthly data for 25 firms. He estimates the model: Sales = β₀ + β₁ Advertising + ε. The following table shows a portion of the regression results. Which of the following are the competing hypotheses used to test whether Advertising is significant in predicting Sales? A) H₀: b₁ = 0; H_A: b₁ ≠ 0. B) H₀: b₁ = 2.88; H_A: b₁ ≠ 2.88. C) H₀: β₁ = 0; H_A: β₁ ≠ 0. D) H₀: β₁ ≠ 0; H_A: β₁ = 0.

Question

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The competing hypotheses used to test whether Advertising is significant in predicting Sales are stated as H₀: β₁ = 0 (null hypothesis, there is no relationship between advertising and sales) and H_A: β₁ ≠ 0 (alternative hypothesis, there is a significant relationship between advertising and sales). Option A is incorrect because it incorrectly states the null hypothesis. Option B is incorrect because it proposes a specific value for the coefficient, which is not appropriate for a hypothesis test. Option D is incorrect because it incorrectly states the alternative hypothesis.

A Marketing Analyst Wants to Examine the Relationship Between Sales