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The correlation between sales and price is -.6 and that between sales and advertising is .7. Based on this statement, what can you say about the relationship between sales and price and advertising expenditures in the category?

User Vasili
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Final answer:

There is a negative correlation between sales and price, indicating that sales decrease when prices rise. On the other hand, there is a positive correlation between sales and advertising expenditures, suggesting that sales increase with more advertising.

Step-by-step explanation:

The correlation between sales and price is negatively correlated with a value of -0.6, suggesting that when the price increases, sales tend to decrease, and vice versa. This indicates a negative relationship, also reflective of the general economic principle that higher prices tend to reduce quantity demanded. Conversely, the correlation between sales and advertising is 0.7, which suggests a positive relationship wherein increased advertising expenditures are associated with increased sales. This higher positive correlation coefficient indicates that advertising expenditure has a more significant positive impact on sales compared to the negative impact of price on sales.

User Bonus
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