Question

A regression analysis between sales (in $1000s) and price (in dollars) resulted in the following equation: ŷ = 50,000 − 8x The above equation implies that an increase of _____. a. $8 in price is associated with an increase of $8,000 in sales b. $1 in price is associated with a decrease of $8,000 in sales c. $1 in price is associated with a decrease of $42,000 in sales d. $1 in price is associated with a decrease of $8 in sales

Answer 1

Answer:

b. $1 in price is associated with a decrease of $8,000 in sales

Step-by-step explanation:

Linear function:

A linear function has the following format:

$y = mx + b$

In which m is the slope, which represents by how much y changes when x changes by 1.

ŷ = 50,000 − 8x

This means that $m = -8$, in thousands of dollars, so when the price x increases by 1, the sales will be decrease by $8,000, and thus, the correct answer is given by option b.