Reading 11- LOS E (Part 2): Q1 following, dollars, industry, class, television

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1.Paul Frank is an analyst for the retail industry. He is examining the role of television viewing by teenagers on the sales of accessory stores. He gathered data and estimated the following regression of sales (in millions of dollars) on the number of hours watched by teenagers (in hours per week):

Sales_t = 1.05 + 1.6 TV_t

Which of the following is the most accurate interpretation of the estimated results? If TV watching:

A)   goes up by one hour per week, sales of accessories increase by $1.60.

B)   changes, no change in sales is expected.

C)   goes up by one hour per week, sales of accessories increase by $1.6 million.

D)   is zero (that is, every teenager turns off the TV for a week), the expected sales of accessories is $0.

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The correct answer was C)

The interpretation of the slope coefficient is the change in the dependent variable (sales in millions of dollars) for a given one-unit change in the independent variable (TV hours per week). The intercept of 1.05 means that 1.05 million dollars worth of accessories is expected to be sold even if TV watching is zero.