A retailer, in business for over 50 years, has developed the following regression model from the past 60 months of operating data:
Monthly sales dollars = $50,000 + $4.70A + $30B − $1,000X
Where:
A = number of customers
B = advertising dollars per month
X = 1 if a winter month
X = 0 if other months
An appropriate interpretation of this model is that:
A) The business is seasonal, generating higher sales in winter months than other months.
B) Advertising is not cost effective.
C) Within the relevant range, each additional customer will make an average purchase of $4.70 per month.
D) Sales are always expected to be at least $50,000.

Question

Quizplus · Accepted Answer

DC) The coefficient for A ($4.70) represents the average increase in monthly sales dollars for each additional customer, indicating that each customer is expected to make an average purchase of $4.70 per month.D) The constant term ($50,000) in the regression equation represents the baseline sales dollars when all other variables (A, B, and X) are zero. This suggests that sales are expected to be at least $50,000, assuming no customers, no advertising, and it's not a winter month.

A Retailer, in Business for Over 50 Years, Has Developed