A regression analysis between y, sales (in $1000) and x, advertising (in $) yielded the least squares line = 60 + 5x. We can interpret the slope by saying that we estimate for each extra $1 spent on advertising that sales will increase by $5 000, on average.

Question

A regression analysis between y, sales (in $1000) and x, advertising (in $) yielded the least squares line  = 60 + 5x. We can interpret the slope by saying that we estimate for each extra $1 spent on advertising that sales will increase by $5 000, on average.

Quizplus · Accepted Answer

The slope of the least squares line represents the change in y for every unit increase in x. In this case, since the unit of x is in dollars, we can interpret the slope as the estimated change in sales (y) for every extra dollar spent on advertising (x). Therefore, for every extra $1 spent on advertising, we estimate that sales will increase by $5 (not $5,000 as stated in the question).

A Regression Analysis Between Y, Sales (In $1000) and X