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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?

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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.

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User Bonus
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