Question

The data below represent a firm’s dollars spent on advertising for a sample of 4 months and the firm’s sales (in units sold) for those months.

Month	Advertising Expenditures (x)	Units Sold (y)
1	$2,215	543
2	$2,975	664
3	$2,150	538
4	$2,060	575

1. What is the slope of the simple regression line (using the OLS method)?

2. What is the intercept of the simple regression line (using the OLS method)?

3. What is the correct interpretation of the intercept?

4. What is the correct interpretation of the slope?

Answer 1

Ans:

Month	Advertising Expenditures (x)	Units Sold (y)
1	$2,215	543
2	$2,975	664
3	$2,150	538
4	$2,060	575
mean	2,350	580
std .dev	421.49	58.35
r=	0.9128
slope,b=	0.1264
intercept,a=	283.05

Regression equation:

y'=0.1264 x+283.05

1)

slope=0.1264

2)

y-intercept=283.05

3)When expenditure on advertising is 0,number of units sold=283.05

4)

For every dollar spent on advertising,number of units sold increases by 0.264

Units Sold (y) y = 0.1264x + 283.05 R=0.8332 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500