Question

Consider the following sample regression equation yˆy^ = 150 – 20x, where y is the demand for Product A (in 1,000s) and x is the price of the product (in $). The slope coefficient indicates that if ________.

Multiple Choice

• the price of Product A increases by $1, then we predict the demand to decrease 20

• the price of Product A increases by $1, then we predict the demand to decrease by 20,000

• the price of Product A increases by $1, then we predict the demand to increase by 20,000

• the price of Product A increases by $1, then we predict the demand to increase by 20

Answer 1

Solution:

Correct Option is

the price of Product A increases by $1, then we predict the demand to decrease by 20,000

Explanation:

Given equation is

y^ = 150 – 20x

Slope is -20

Negative slope indicates that as one variable increases , other variable decreases.

Dependent variable is given in 1,000s

So , as independent variable changes by 1 unit , the dependent variable changes by 20 * 1000 = 20000 units.

So , correct answer is

the price of Product A increases by $1, then we predict the demand to decrease by 20,000