Ordinary least squares is used to estimate a linear relationship between a firm's quantity sold per month and its total promotional expenditures, and the slope of the linear function is found to be positive and significantly different from zero. Assuming that all other variables, including product price, were constant during the period covered by the data set, this result implies that
A) the firm should spend more on promotional expenditures.
B) the firm should spend less on promotional expenditures.
C) promotional expenditures influence demand.
D) promotional expenditures have no influence on demand.

Question

Quizplus · Accepted Answer

A positive and significantly different from zero slope in the context of a linear relationship between a firm's quantity sold per month and its total promotional expenditures, assuming all other variables are constant, implies that there is a positive relationship between promotional expenditures and quantity sold. This means that as promotional expenditures increase, the quantity sold also increases, indicating that promotional expenditures influence demand.

Ordinary Least Squares Is Used to Estimate a Linear Relationship