Suppose your lead analyst runs a simple regression of Profits (Y) on price (X). You know that the average profit in the sample was $1,000 and the average price was $25. If your analyst reports that the intercept from the simple regression is 900, what can you infer about the estimated slope?
A) The estimated slope is 4.
B) The estimated slope is -4.
C) The estimated slope is 2.
D) None of these choices are correct.

Question

Quizplus · Accepted Answer

The intercept is the value of Y when X is 0. So, if the intercept is 900, then the estimated profit when the price is 0 is $900. The slope is the change in Y for a one-unit change in X. So, if the slope is 4, then the estimated profit increases by $4 for each $1 increase in price.

Suppose Your Lead Analyst Runs a Simple Regression of Profits