696 CHAPTER 16 fi, ‘The slope coefficient is 65, which implies that for each increase in L unit of X, the value of ¥ is expected to increase by .65 units. iii, The slope coefficient s.65, which implies that the average value of | Y=.65. iv. The slope coefficient is .65, which implies that for each increase in L unit of X, the value of Y is expected to increase by 11.9 units. c. Predict the expected weekly sales, if the intelligence test score of a sales- man is 5. Answers: ai b. ‘. Steps to e followed by the students: 1, Interpret intercept coefficient 2. Interpret slope coefficient 3. Solve the equation by inserting X= 5 Y=11.9-0.65X Y= 11,9-0.65 (5) =8.65, ~ 16.1 The term regression was originally used in 1885 by Sir Francis Galton in his analysis of the relation- ship between the heights of children and parents He formulated the “lw of universal regression” which specifies that “each peculiarity in a man is shared by his Kinsmen, but on average in a less degree.” (Evidently, people spoke this way in 1885.) In 1903, two statisticians, K. Pearson and A. Lee, took a random sample of 1,078 father-son pairs o examine Galton’ law (“On the Laws of Inheritance in Man, Inheritance of Physical Characteristics,” Biometrika 2:457-462). Their sample regression line was Son’s height = 33.73 + .516 x Father's height a, Interpret the coefficients 'b, What does the regression line tell you about the heights of sons of tal fathers? ©. What does the regression line tll you about the heights of sons of short fathers? 16.2 XH602 Attempting to analyze the relationship between advertising and sales, the owner of a furniture store recorded the monthly advertising. budget (Sthousands) and the sales ($:illions) for a sample of 12 months. The daca are listed here. 60 54 28 2B 9B 89 125 2% 3136 8 9 99 Sales 120 114 126 137 144 159 a. Draw a scatter diagram. Does it appear that advertising and sales are linearly related? ’ Calculate the least squares line and interpret the coefficients. 16,3 16.92 ‘Ta determine how the number of housing starts is affected by mortgage rates an economist recorded the average mortgage rate and the num ber of housing starts in a large county for the past 10 years. These data are listed here. Rate 85 78 76 75 80 Stars 115111185201 206 Rate 84 88 89 8580 Stars 1671557133150, 164] sf3 25 99 159 that sthe using pat SIMPLE LINEAR REGRESSION AND CORRELATION 697. a. Determine the regression line. , What do the coefficients of the regression line tell you about the relationship between mort- gage rates and housing starts? 164 M604 Critics of television often refer to the detrimental effects that all the violence shown on. television has on children. However, there may be another problem. It may be that watching televi- sion also reduces the amount of physical exercise, causing weight gains. A sample of 15 10-year-old children was taken. ‘The number of pounds each child was overweight was recorded (a negative number indicates the child is underweight). In addition, the number of hours of television view- ing per week was also recorded. These data are listed here. Television 4234-25-35 «37-38-31: B Overweight 18 6 0-1 1 4 7 7 Television 19 29 38 28 29 36 18 Overweight -9 8 8 5 3 14 7 a. Draw the scatter diagram. . Caleulate the sample regression line and describe what the coefficients tell you about the relationship between the two variables, 165 XA605 ‘To help determine how many beers to stock the concession manager at Yankee Stadium. ‘wanted to know how the temperature affected beer sales. Accordingly, she took a sample of 10 games and recorded the number of beers sold and the tem- perature in the middle of the game, Temperature 80 68787987 Number of beers 29533 1439 13,829 21,286 30,985, Temperature 74 7 Number of beers 7,187 30,240 37,596, 9,610 28742 a. Compute the coefficients of the regression line », Interpret the coefficients. ‘The exercies that follow were created 10 allow you to see bow regres analysis is used ta solve realistic problems. As a result, most feanure a large number of observations. We anticipate thar ‘most students will solve these problems using a computer and statistical sofware. However, for students without these resorees, we have cimputed the means, variances, and covariances that will permit them to complete the calclations manually (See Appendix A.) 166 16.7 16.8 Xe16-06" In television's early years, most com= ‘mercials were 60 seconds long. Now, however, commercials can be any length. The objective of ‘commercials remains the same—to have as many viewers as possible remember the product in a favorable way and eventually buy it. In an experi- ment to determine how the length of a commercial is related to people's memory of it, 60 randomly selected people were asked to watch a 1-hour tele- vision program. In the middle of the show, a com- ‘mercial advertising a brand of toothpaste appeared. ‘Some viewers watched a commercial that lasted for 20 seconds, others watched one that lasted for 24 seconds, 28 seconds, .. ., 60 seconds. The essen- tial content of the commercials was the same. After the show, each person was given a test to measure how much he or she remembered about the prod- uct. The commercial times and test scores (on a 30-poine test) were recorded, a, Draw a scatter diagram of the data to deter~ mine whether @ linear model appears to be appropriate. b, Determine the least squares lin, c. Interpret the coefficients 411607, Florida condominiums are popular winter fetteats for many North Americans. In recent years the prices have steadily increased. A real esate agent wanted to know why prices of similar-sized apartments in the sime building vary. A possible answer lies in the floor. It may be that the higher the floor, the preter the sale price ofthe apartment. He recorded the price (in $1,000s) of 1,200 sqft con- dominiums in several buildings in che same location that have sold recently andthe floor numberof the condominium. a. Determine the regression line. b. What do the coefficients tell you about the relationship between the two variables? XH609 In 2010, the United States conducted a census of the entire country. The census is completed by mail. ‘To help ensure that the questions are understood, a random sample of Americans take the questionnaire before it is sent out. As part of their analysis, hey record the amount of time and ages of the sample, Use the least squares method to analyze the relationship. between the amount of time taken to complete the questionnaire and the age of the individual answering the questions, What do the coeffi- cients tell you about the relationship between the ewo variables?698 16.10 16.11 CHAPTER 16 XH6A0 Besides their known long-term effects, do cigarettes also cause short-term illnesses such as colds? To help answer this question, a sample of Smokers was drawn. Fach person was asked to report the average number of cigarettes smoked per day and the number of days absent from work due to ‘colds lst year, - a. Determine the regression line. >, What do the coefficient tll you about the rela- tionship between smoking cigarettes and sick days because of colds? H. Fire damage in the United States amounts ‘o billions of dollars, much of it insured. The time taken to arrive at the fire is critical. This raises the ‘question, Should insurance companies lower pre- ‘miums if the home to be insured is elose to a fre station? To help make a decision a study was undes- taken wherein a number of fires were investigated. 16.12 16.3, ‘The distance to the nearest fire station Gin miles) and the percentage of fire damage were recorded. Determine the least squares line and interpret the coefficients. xn A real estate agent specializing in com- ‘mercial realestate wanted a more precise method of judging the likely selling price (in $1,0005) of apartment buildings. As fist effort, she recorded the price of a number of apartment buildings sold recently and the number of square feet (in 1,000s) in the building. a. Calculate the regression line. b, What do the coefficients tell you about the rela- tionship bevveen price and square footage? A116:12 Millions of boats are registered in the United States. As is the case with automobiles, there is an active used-boat market, Many of the1645 APPLICATIONS 1s sold 1,003) he rela- gc? in the nobiles, of the SIMPLE LINEAR REGRESSION AND CORRELATION 699, boats purchased require bank financing, and, as a result, itis important for financial institutions to be capable of accurately estimating the price of boats. ‘One variable tha affects the price isthe number of hours the engine has been run. To determine the ‘effect of the hours on the price, a financial analyst recorded the price in $1,000s) of a sample of 2007 24-foot Sea Ray cruisers (one of the most popolar boats) and the number of hours they had been run. Determine the leat squares line and explain what the coefficients ell you. %003.62 (Exercise 3.62 revisited) In an attempt to determine the factors that affect the amount of energy used, 200 houscholds were analyzed. In each, the number of occupants and the amount of electricity used were measured, Determine the regression line and interpret the results. XH615 An economist for the federal governmentis attempting to produce a better measure of poverty than is currently in use. To help acquire informa~ tion, she recorded the annual household income ois ‘Applicants 16.16 16.17 {Gn $1,000s) and the amount of money spent on food during one week for a random sample of house- holds, Determine the regression line and interpret the coefficients. Xd6-16t An economist wanted to investigate the relationship between office rents (the dependent variable) and vacancy rates. Accordingly, he took andom sample of monthly office rents and the sentage of vacant office space in 30 different 1, Determine the regression line. b, Interpret the coefficients. X005.64 (Erercise 3.64 revisited) One general belief held by observers of the business word is that taller men earn more money than shorter men, In a University of Pittsburgh study, 250 MBA gradu- ates, all about 30 years old, were polled and asked to report their heighe (in inches) and theie annual income (tothe nearest $1,000), a, Determine the regression lin. . What do the coefficients cell you? n HUMAN RESOURCES MANAGEMENT