CMA Foundation · Fundamentals of Business Mathematics and Statistics · Correlation and Regression
For a firm, the regression line of advertising spend Y (in ₹ thousand) on sales X (in ₹ lakh) is Y = 4 + 0.5X. What is the estimated advertising spend, in ₹ thousand, when sales are ₹ 30 lakh?
The estimated advertising spend is ₹ 19 thousand. Putting sales of 30 into the regression line Y = 4 + 0.5X gives 4 plus 15, which equals 19. Leaving out the intercept would wrongly give 15.
- A15
- B19Correct
- C34
- D11.5
Explanation
Substitute X = 30 in Y = 4 + 0.5X. Y = 4 + 0.5 × 30 = 4 + 15 = 19. The value 15 comes from omitting the constant 4, while 34 comes from adding 30 to 4.
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