CHEPTER # 5

SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

SIMPLE REGRESSION

Simple regression is a technique which determines a relationship between two variables to

estimate one of the variables for a given value of the other variable. The variable whose value is
to be estimated is called dependent variable and denoted by (Y) whereas the variable whose
value is given is called independent variable (X)

REGRESSION LINE

Regression line Y upon X.

.
Y = a+bX

ESTIMATION OF REGRESSION LINE Y UPON X

Regression line y on x estimated by the following equation:

y = a + bx

in the above equation

y = dependent variable.
x = independent variable.
a = a constant value and measures the y-intercept of the regression line
b = a constant value and measures the change in y per unit change in x. It is the slope of the
regression line.

b = nΣxy – ΣxΣy
nΣx2 – (Σx) 2

a = mean of y – b (mean of x)

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 CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Example 1
Following table based on the sales(thousands) and advertising expenses of company for last six
years
Years Advertising expanse Sales(thousands)
(millions) y
x
2015 5 2
2016 6 3
2017 8 4
2018 10 7
2019 12 8
2020 16 10

Required:
(i) Regression line for estimating sales volume
(ii) Estimate sales volume for the year 2021 if advertising expense would be 20 millions
(iii) Describe the relationship.

Solution:
x y xy x2 ŷ (y- ŷ) (y- ŷ) 2 (X-Meanx) (X-Meanx) 2
5 2 10 25 -1.5+0.75(5)= 2-2.25 = 0.0625 -4.5 20.25
2.25 -0.25
6 3 18 36 -1.5+0.75(6)= 0 0 -3.5 12.25
3.0
8 4 32 64 -1.5+0.75(8)= -0.5 0.25 -1.5 2.25
4.5
10 7 70 100 -1.5+0.75(10)= 1 1 0.5 0.25
6.0
12 8 96 144 -1.5+0.75(12= 0.5 0.25 2.5 6.25
7.5
16 10 160 256 -1.5+0.75(16)= -0.5 0.25 6.5 42.25
10.5
57 34 386 625 1.8125 83.5
y=a+bx

b= nΣxy – ΣxΣy
nΣx2 – (Σx) 2
b= 6(386) – 57(34)
6(625) – (57) 2
b= 2316– 1938
3750 – 3249

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

b= 378
501

Mean of y = Σy/n = 34/6 = 5.67 , Mean of X = Σx/n = 57/6 = 9.5

b= 0.75
a=mean of y-b(mean of x) = 5.67 - (0.75)(9.5) = -1.5
y= -1.5+0.75x

(ii)sales volume for the 2021

y= -1.5+0.75x

x=20

y=-1.5+0.75(20) = 13.5 thousands

(iii)value of b is positive so relationship between sales and advertising is positive or direct

SE = [sqrt Σ(y - ŷ)2 / (n - 2) ] / sqrt [ Σ(x – mean of x)2 ] =0.073

SE = [sqrt (1.8125/4)/ sqrt 83.5] = 0.0736

Tcalc = b/SE = 0.75/0.0736 = 10.27

Question # 1

Given the following data, fit the regression line (y on x).

X 2.80 2.10 3.75 2.80 2.55 3.00 2.50 2.20 2.90 3.80 2.70 3.45
Y 3.94 2.63 3.20 3.57 2.25 2.80 3.40 2.00 3.70 3.97 3.20 3.90

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 1.059 .885 1.196 .259

x .748 .302 .616 2.475 .033

a. Dependent Variable: y

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Ans:, y=0.75X+.05
Y= 1.059+0.748X

Question # 2

Given the data:

X 3 7 5 4 3 3 9 6
Y 8 3 2 2 3 4 3 7

Fit a regression line of y on x and hence estimate y if x=4.5.

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 5.029 2.226 2.259 .065

x -.206 .412 -.200 -.500 .635

a. Dependent Variable: y

Y= 5.029 – 0.206X
Y= 5.029 – 0.206(4.5)
Y= 4.102

Question # 3

Calculate the equation of the least squares regression line of y on x from the following
data.

X 1 3 3 4 5 5
Y 5 3 2 2 0 1

Ans: Y = 5.88 – 1.06X

Y= 5.971 – 1.08X

Coefficientsa

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 5.971 .620 9.638 .001

x -1.087 .165 -.957 -6.603 .003

a. Dependent Variable: y

Question # 4

An organization has collected the following data showing relationship between price charged and
quantities sold:

Price 5 6 7 8 9 10 12 13

Qty 590 56 555 540 52 500 480 475

0 5

i) Determine the regression line for estimating quantity.

ii) Compute the quantity that the company may produce if it wishes to sell at the price
of 18
X= price
Y= quantity

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 653.266 8.598 75.978 .000

x -14.302 .941 -.987 -15.200 .000

a. Dependent Variable: y

Y=653.266 – 14.302X
If X=18
Y= 395.83

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Question # 5

The manager of an educational computer facility would like to develop a model to predict the
number of services calls per annum for interactive terminals based upon the age of the terminal.
sample of 10 terminals was selected. The data follows:

Terminal 1 2 3 4 5 6 7 8 9 10
No.of service calls 3 4 3 5 5 7 8 10 10 12
Age(years) 1 1 2 2 3 3 4 4 5 5

Fit a regression line to predict the number of services calls.

Ans: Y= 0.092+0.434X

Question # 6

Compute the regression line for estimating weight (cm.) of six adults.

Heights(cm) 170 175 176 178 183 184

Weight (kg) 57 64 70 76 71 82

Question # 7

A personnel officer is studying performances of job applicants on two tests given when the
applicant contacts the firm. The first test measures mental ability; the second measure potential
for success in the job. The test-score results of a sample of eleven applicants are shown below:

Applicants A B C D E F G H I J K
Mental 37 40 36 49 36 40 39 47 32 65 27
ability
Potential 63 42 41 39 38 49 25 29 15 52 25

Find regression line for estimating potential for success.

Question # 8

The following data were obtained in a study of the relationship between the weight and chest
size of infants at birth:

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Weight(kg) 3.71 2.31 4.30 3.21 4.32 2.75 5.52 2.15 4.41
Chest size 28.7 28.3 30.3 27.2 27.7 29.5 36.5 26.3 32.2

Compute and interpret the regression line for estimating weight.

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 21.696 2.470 8.785 .000

x 2.186 .653 .784 3.347 .012

a. Dependent Variable: y

Y= 21.696 + 2.186X

Question # 13

A firm trains employees to use a statistical software package. A random sample of trainees
turned in the following performance:
Traine
Hours of Training (x) Number of errors (y)
e
A 1 6
B 4 3
C 6 2
D 8 1
E 2 5
F 3 4
G 1 7

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

i) Determine the least square regression line of y on x.

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 6.825 .412 16.557 .000

x -.791 .095 -.966 -8.302 .000

a. Dependent Variable: y

Y=6.825 – 0.791X

ii) Interpret the co-efficient of regression.

b is negative so we have a negative or indirect relationship.

Predict the number of errors for a person with 5 hours of training.

If X=5
Y= 2.87

Question # 14

A research compiled the following information to investigate, the relationship between

smoking and lung cancer:

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Per Capital Deaths per 100.000

Country
Cigarette Consumption From Lung Cancer
USA 1300 20
UK 1100 46
Finland 1100 65
Switzerland 510 25
Canada 500 15
Holland 490 24
Australia 480 18
Denmark 380 17
Sweden 300 11
Norway 250 9
Iceland 230 6

Compute r and ~ describe what they mean

Ans: 0.5476

Question # 15
Calculate the co-efficient of correlation for the following data:
Annual percentage Annual percentage
increase in advertising increase in sale revenue
expenditure

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

(X) (Y)
1 1
3 2
4 4
6 4
8 5
9 7
11 8
14 9
ii) What is the purpose of finding the correlation co-efficient and what dose its value
indicate in respect of the above data on advertising expenditure and sales revenue?

Ans: r = 0.9770
Question # 16
Calculate the co-efficient of correlation for the following data:

Annual percentage Annual percentage

increase in advertising increase in sale revenue
expenditure
(X) (Y)
1 1
3 2
4 4
6 4
8 5
9 7
11 8
14 9

ii) What is the purpose of finding the correlation co-efficient and what dose its value
indicates in respect of the above data on advertising expenditure and sales revenue?

Ans: r = 0.9770

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CHEPTER # 5
SIMPLE REGRESSION AND CORRELATION

EXERCISE # 5
BY SHAHID MEHMOOD [email protected]

Question # 17
An analyst is studying the relationship between shopping center traffic and a department
Store’s daily sales. The analyst develops an index to measure the daily volume of traffic
Entering the shopping center and an index of daily sales. The following table shows the
Index value for 9 randomly selected days.

Traffic Index (x) Sale Index (y)

71 135
82 170
111 184
85 160
89 175
110 190
75 140
105 152
120 210

Forecast sale index for a traffic index of 132 by the method of least square.

Ans: 198.29

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 60.494 28.029 2.158 .068

x 1.146 .293 .828 3.911 .006

a. Dependent Variable: y

Y=60.494 + 1.146X
If X=132
Y= 211.766

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