Sales = 50 + 10, investment spending + 20·advertisement spending Predict sales r

Question

Sales = 50 + 10, investment spending + 20·advertisement spending Predict sales resulting from a $ 15,000 investment spending and $10,000 advertisement spending. a. Provide the accurate interpretation of the estimated coefficients associated with investment spending and advertisement spending, respectively. b. b.1 Interpretation of the estimated coefficient associated with investment spending b.2. Interpretation of the estimated coefficient associated with advertisement spending Suppose that the CEO of this fashion boutique asks you to guide her decision to increase sales. What will be your advice based on the estimate results of this model? Please motivate your proposed spending. c. Sales = 50 + 10* investment spending + 20*a vertisement spending

Explanation / Answer

a) Given Sales = 50 + 10*Investment Spending + 20*advertisement Spending
The predict sales from 15,000 investment spending and 10,000 advertisement spending is
Sales = 50 + 10*15000 + 20*10000
= 350050

b)
b-1) The coefficient of investment spending is 10 which is >0, thus there exist positive correlation between sales and investment spending
If 1 dollar increase in investment spending with constant adveristment spending then the sales will be increase $10

b-2) The coefficient of advertisments spending is 20 which is >0, thus there exist positive correlation between sales and investment spending
If 1 dollar increase in investment spending with constant adveristment spending then the sales will be increase $20

c)
since the coefficient of 'advertisement spending' is higher than that of investment spending
therefore, if we spent on advertisement spending then we will more increase in sales

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