Seven teenagers, four boys and three girls, were given $200 each to go on a shopping spree.

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Seven teenagers, four boys and three girls, were given $200 each to go on a shopping spree. An advertising agency, which specializes in youth markets, gave the teens the money. An account executive accompanied the teens while they were shopping. Not only did the agency want to learn what they bought, but also what they talked about to see what was on their minds. “It’s not so much to stay in tune with trends, because trends are elusive. It’s more what’s really happening with teens and what’s important to them.” 

a. Discuss the trade-offs between sample size (7 teens), cost, and reliability of what is learned from this experiment. 

b. An agent accompanied the teens while they were shopping. Why didn’t the ad agency avoid this expense and just look at what the teens bought?

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Managerial Economics and Organizational Architecture

ISBN: 978-0073375823

5th edition

Authors: James Brickley, Jerold Zimmerman, Clifford W. Smith Jr

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