Revisit exercise 1.7. Now that you know several functional forms, which one might be appropriate to study the relationship between advertising impressions retained and the amount of money spent on advertising? Show the necessary calculations.
Exercise 1.7
The data presented in Table 1.5 was published in the March 1, 1984 issue of the Wall Street Journal. It relates to the advertising budget (in millions of dollars) of 21 firms for 1983 and millions of impressions retained per week by the viewers of the products of these firms. The data are based on a survey of 4000 adults in which users of the products were asked to cite a commercial they had seen for the product category in the past week.
a. Plot impressions on the vertical axis and advertising expenditure on the horizontal axis.
b. What can you say about the nature of the relationship between the two variables?
c. Looking at your graph, do you think it pays to advertise? Think about all those commercials shown on Super Bowl Sunday or during the World Series.
