Answer:
Correct answer is option d. increase of $1 in advertising is associated with an increase of $4000 in sales.
Step-by-step explanation:
Given the equation of regression analysis is given as:
[tex]y= 30,000 + 4x[/tex]
where [tex]x[/tex] is the cost on advertising in Dollars.
and [tex]y[/tex] is the sales in Thousand Dollars.
To find:
The correct increase in sales when there is increase in the advertising cost.
Solution:
Suppose there is an increase of [tex]\$1[/tex] in the advertising cost.
Let the initial cost be [tex]x[/tex] then the cost will be [tex](x+1)[/tex].
Initial sales
[tex]y= 30,000 + 4x[/tex] ....... (1)
After increase of $1 in advertising cost, final cost:
[tex]y'= 30,000 + 4(x+1)\\\Rightarrow y' = 30,000+4x+4\\\Rightarrow y' = 30,004+4x ..... (2)[/tex]
Subtracting (2) from (1) to find the increase in the sales:
[tex]y'-y=30004+4x-30000-4x = 4[/tex]
The units of sales is Thousand Dollars ($1000).
So, increase in sales = [tex]4 \times1000 = \bold{\$4000}[/tex]
So, correct answer is:
d. increase of $1 in advertising is associated with an increase of $4000 in sales.
