Impact of Advertising Expenditures on Sales

Hard Multiple Regression Analysis Regression Coefficients

Consider a multiple regression analysis conducted to understand the relationship between a company's sales (dependent variable) and various independent variables, including advertising expenditures, pricing strategies, and economic indicators. The regression model is expressed as:

$$Sales = \beta_0 + \beta_1 \times Advertising + \beta_2 \times Price + \beta_3 \times Economic + \epsilon$$

In this model, the coefficients represent the change in sales associated with a one-unit change in each independent variable, assuming all other variables remain constant.

Suppose the regression output provides the following coefficient estimates: $ \beta_1 = 5.2 $, $ \beta_2 = -3.1 $, and $ \beta_3 = 1.4 $.

Based on this information, which statement regarding the impact of advertising expenditures on sales is correct?

A 1 unit increase in advertising expenditures is associated with a 5.2 unit increase in sales.

A 5.2 unit increase in advertising expenditures will lead to a 1 unit increase in sales.

The advertising coefficient indicates that increasing advertising by 1% results in a 5.2% increase in sales.

Hint

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