A marketing analyst wants to examine the relationship between sales (in $1,000s)

Question

A marketing analyst wants to examine the relationship between sales (in $1,000s) and advertising (in $100s) for firms in the food and beverage industry and so collects monthly data for 25 firms. He estimates the model: Sales = ?0 + ?1Advertising + ?. The following table shows a portion of the regression results.

Coefficients

Standard Error

t-stat

p-value

Intercept

40.10

14.08

2.848

0.0052

Advertising

2.88

1.52

1.895

0.0608

Which of the following are the competing hypotheses used to test whether Advertising is significant in predicting Sales?

H0:b1 = 0; HA:b1 ? 0.

H0:b1 = 2.88; HA:b1 ? 2.88.

H0:?1 = 0; HA:?1 ? 0.

H0:?1 = 0; HA:?1 ? 0.

Coefficients

Standard Error

t-stat

p-value

Intercept

40.10

14.08

2.848

0.0052

Advertising

2.88

1.52

1.895

0.0608

Explanation / Answer

Here we need to test whether Advertising is significant in predicting Sales.

For this we need to test population coefficient of Advertising i.e slope of regression .

Hence the correct hypothesis is

H0:?1 = 0; HA:?1 ? 0.

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