A regression analysis between sales (y in $1000) and advertising (x in dollars) resulted in the following equation: = 30,000 + 5x

The above equation implies that an
A) increase of $4 in advertising is associated with an increase of $5000 in sales.
B) increase of $1 in advertising is associated with an increase of $5 in sales.
C) increase of $1 in advertising is associated with an increase of $34,000 in sales.
D) increase of $1 in advertising is associated with an increase of $5000 in sales.

Question

A regression analysis between sales (y in $1000) and advertising (x in dollars) resulted in the following equation: ​  = 30,000 + 5x
​
The above equation implies that an
A) increase of $4 in advertising is associated with an increase of $5000 in sales. 
B) increase of $1 in advertising is associated with an increase of $5 in sales. 
C) increase of $1 in advertising is associated with an increase of $34,000 in sales. 
D) increase of $1 in advertising is associated with an increase of $5000 in sales.

Quizplus · Accepted Answer

The coefficient of advertising (x) is 5 which means that for every increase in advertising by $1, there is an increase in sales by $5, as stated in option D. Option A is incorrect as it assumes a non-existent coefficient of 5000/4. Option B is partly correct as its coefficient of 5 matches with the given equation but it assumes an increase of $1 in advertising instead of $4. Option C is incorrect as it wrongly assumes a coefficient of 34,000 instead of 5.

A Regression Analysis Between Sales (Y in $1000) and Advertising