The ABC Company has been evaluating the performance of two advertising agencies it deals with. They produce the following scatterplot of sales against advertising expenditures.

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To evaluate the performance of the two advertising agencies, we need to analyze the scatterplot of sales against advertising expenditures.

A scatterplot is a graphical representation that shows the relationship between two variables. In this case, the variables are sales and advertising expenditures. The x-axis of the scatterplot represents advertising expenditures, while the y-axis represents sales.

To understand the performance of the two advertising agencies, we can look at the overall pattern of the scatterplot and observe any trends or correlations between the variables. Here are a few steps to analyze the scatterplot:

1. Identify the data points: Each point on the scatterplot represents a specific combination of sales and advertising expenditures for a given period of time. Each data point corresponds to a specific observation or instance.

2. Determine the direction of the relationship: Look at the overall pattern of the points. If the points are mostly clustered in an upward direction, it suggests a positive relationship between sales and advertising expenditures. If the points are clustered in a downward direction, it suggests a negative relationship. A random or scattered pattern indicates no clear relationship.

3. Examine the dispersion of the points: The dispersion of the points indicates the degree of variability in the data. If the points are tightly clustered around a line or curve, it suggests a strong relationship. If the points are spread out, it suggests a weak relationship.

4. Look for outliers: Outliers are data points that significantly deviate from the overall pattern of the scatterplot. They can indicate unusual or extreme observations that may need further investigation.

5. Calculate correlation coefficient: The correlation coefficient measures the strength and direction of the linear relationship between two variables. It ranges from -1 to +1. A positive value indicates a positive relationship, a negative value indicates a negative relationship, and a value close to zero indicates no relationship.

By analyzing the scatterplot and considering these factors, you can assess the performance of the two advertising agencies and make conclusions about their effectiveness in driving sales for the ABC Company.