A household appliance manufacturer wants to analyze the relationship between total sales and the company's three primary means of advertising (television, magazines, and radio). All values are in millions of dollars. They found the following regression equation.

Question

A household appliance manufacturer wants to analyze the relationship between total sales and the company's three primary means of advertising (television, magazines, and radio). All values are in millions of dollars. They found the following regression equation.
Sales = 250 + 6.75 TV + 3.5 Radio + 2.3 Magazine
One of following interpretations is correct. Which is it? Explain what's wrong with the others.
a) If they did no advertising, their income would be $250 million.
b) Every million dollars spent on radio makes sales increase $3.5 million, all other things being equal.
c) Every million dollars spent on magazines increases TV spending $2.3 million.
d) Sales increase on average about $6.75 million for each million spent on TV, after allowing for the effects of the other kinds of advertising.

Bot · Answer

d) Sales increase on average about $6.75 million for each million spent on TV, after allowing for the effects of the other kinds of advertising.
Explanation: The other answers are incorrect because they do not accurately reflect the information given in the regression equation. The equation states that for every million dollars spent on TV, sales increase by $6.75 million, after allowing for the effects of the other kinds of advertising.