Business Statistics
Read a regression slope
An analyst says each ₹1 lakh of advertising brings ₹3 lakh of sales. What does a fitted slope actually support?
A regression slope summarizes association in the fitted data. It does not by itself identify an intervention’s effect.
Slope = sum of centered x × centered y ÷ sum of squared centered x
The centered x values are −1, 0, 1, so the cross-product sum is 13 − 7 = 6. Divide by 1 + 0 + 1 = 2.
Advertising values are 1, 2 and 3 lakh and sales are 7, 9 and 13 lakh. The centered cross-product sum is 6 and the centered squared x sum is 2. Slope is 3.
The centered x values are −1, 0, 1, so the cross-product sum is 13 − 7 = 6. Divide by 1 + 0 + 1 = 2.
What is the fitted increase in sales for ₹0.5 lakh more advertising within this model?