Question

Regression analysis was applied between sales (y in $1000) and advertising (x in $100) and the following estimated regression equation was obtained. Ŷ = 80 + 6.2x Based on the above estimated regression line, if advertising is $10,000, then the point estimate for sales (in dollars) is a. $700,000. b. $700. c. $62,080. d. $142,000.

Answer 1

Solution:

Given: Regression analysis was applied between sales (y in $1000) and advertising (x in $100) and

the following estimated regression equation was obtained.

Ŷ = 80 + 6.2x

If advertising is $10,000, then the point estimate for sales (in dollars) is =............?

Since x is $100, so we need to use x = $10000/100 = $100

Ŷ = 80 + 6.2* x

Ŷ = 80 + 6.2* 100

Ŷ = 80 + 620

Ŷ = 700 ( in $1000)

But we need answer in only dollars ( $)

Thus multiply this answer by 1000

thus

Ŷ = 700 * 1000

Ŷ = $700,000

Thus correct answer is:  a. $700,000.