Question
The marketing department of a popular electronic store is preparing its work plan for the next financial year. The manager is seeking a 20% increase
The marketing department of a popular electronic store is preparing its work plan for the next financial year. The manager is seeking a 20% increase in advertising budget. He used the simple linear regression technique to analyse the past 10 years' sales and advertising data and noted these results:
- Correlation = 0.86
- For every $1 spent on advertising, the impact is a $5 increase in sales
The manager received approval for the increased advertising budget and rolled out a series of advertising campaigns for the store.
Top of Form
Given this approach is only using the Simple Linear Regression concept, what is the other concepts or formulas to justify if the manager's approach is correct? Explain and justify your point of view.
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