Question

For a certain product we obtained a regression line equation Y = 10 - 0.8 X, where X is price (in $) and Y is sales (in $1,000). The slope of the line (- 0.8) represents:___---.

A. If the price were $10, expected sales would be $8,000.B. If the price were zero, expected sales would $800.C. If the price increases by $1, sales will decrease by $800, on average.D. Sales are maximized when the price is $0.8.
E. None of the other answers are correct.

Answer 1

C. If the price increases by $1, sales will decrease by $800, on average

Explanation:

Slope of regression equation represents the increase/decrease in dependent variable Y due to unit change in independent variable X. Here, independent variable is X is price and dependent variable Y is sales. The slope negative sign represent decrease in dependent variable due to unit increase in independent variable. Sales is given in ($1000) So, (0.8*1000)=800. It means that due to unit dollar increase in price the sales will decrease by $800. Thus, If the price increases by $1, sales will decrease by $800, on average is the correct interpretation.