A retail company wants to find out whether clickthroughs are a good substitute for sales in evaluating the effectiveness of an online ad. One clickthrough is one person clicking on an ad to learn more.

A retail company wants to find out whether clickthroughs are a good substitute for sales in evaluating the effectiveness of an online ad. One clickthrough is one person clicking on an ad to learn more. Clickthroughs have the advantage of being much more plentiful than sales and accumulating much more quickly, allowing the firm to judge quickly whether an ad is effective. Here is some data on sales and clickthroughs for 13 ads (you can download an Excel workbook with the data clickthroughs.xls):

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(a) Calculate (using a software program, if you wish) the correlation coefficient and explain how it can be used to assess whether clickthroughs are a good substitute for sales.

(b) Assume now that the company has determined that clickthroughs are, indeed, an adequate proxy (substitute) for sales. Determine (using linear regression and a software program) what the relationship is between clickthroughs and sales. What level of sales would you predict for 350 clickthroughs?

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