05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

Considerations before
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your …

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CONTENT

As the simple linear regression equation

explains a correlation between 2 variables
(one independent and one dependent
variable), it is a basis for many analyses and
predictions. Apart from business and data-
driven marketing, LR is used in many other
areas such as analyzing data sets in statistics,
biology or machine learning projects and etc.

On this page:

Simple linear regression examples:

problems with solutions.
Infographic in PDF

In our previous post linear regression

models, we explained in details what is
simple and multiple linear regression. Here,

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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

we concentrate on the examples of linear

regression from the real life.

SIMPLE LINEAR REGRESSION

EXAMPLES, PROBLEMS, AND
SOLUTIONS
Simple linear regression allows us to study
the correlation between only two variables:

One variable (X) is called independent

variable or predictor.
The other variable (Y), is known as
dependent variable or outcome.

and the simple linear regression equation is:

Y = Β0 + Β1X

Where:

X – the value of the independent variable,

Y – the value of the dependent variable.
Β0 – is a constant (shows the value of Y when
the value of X=0)
Β1 – the regression coefficient (shows how
much Y changes for each unit change in X)

Example 1:

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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

You have to study the relationship between

the monthly e-commerce sales and the
online advertising costs. You have the survey
results for 7 online stores for the last year.

Your task is to find the equation of the

straight line that fits the data best.

The following table represents the survey

results from the 7 online stores.

Online Monthly E- Online Advertising

Store commerce Sales Dollars (1000 s)
(in 1000 s)

1 368 1.7

2 340 1.5

3 665 2.8

4 954 5

5 331 1.3

6 556 2.2

7 376 1.3

We can see that there is a positive

relationship between the monthly e-
commerce sales (Y) and online advertising
costs (X).

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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

 The positive correlation means that the

values of the dependent variable (y)
increase when the values of the
independent variable (x) rise.

So, if we want to predict the monthly e-

commerce sales from the online advertising
costs, the higher the value of advertising
costs, the higher our prediction of sales.

We will use the above data to build our

Scatter diagram.

Now, let’ see how the Scatter

diagram looks like:
Diagram 1:

The Scatter plot shows how much one

variable affects another. In our example,
above Scatter plot shows how much online
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advertising costs affect the monthly e-

commerce sales. It shows their correlation.

Let’s see the simple linear regression

equation.

Y = Β0 + Β1X

Y= 125.8 + 171.5*X

Note: You can find easily the values for Β0 and

Β1 with the help of paid or free statistical
software, online linear regression calculators
or Excel. All you need are the values for
the independent (x) and dependent (y)
variables (as those in the above table).

Now, we have to see our regression line:

Graph of the Regression Line:

Diagram 2

Linear regression aims to find the best-fitting

straight line through the points. The best-
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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

fitting line is known as the regression line.

If data points are closer when plotted to

making a straight line, it means the
correlation between the two variables is
higher. In our example, the relationship is
strong.

The orange diagonal line in diagram 2 is the

regression line and shows the predicted
score on e-commerce sales for each
possible value of the online advertising costs.

Interpretation of the results:

The slope of 171.5 shows that each increase

of one unit in X, we predict the average of Y
to increase by an estimated 171.5 units.

The formula estimates that for each increase

of 1 dollar in online advertising costs, the
expected monthly e-commerce sales are
predicted to increase by $171.5.

This was a simple linear regression example

for a positive relationship in business. Let’s
see an example of the negative relationship.

Example 2:

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You have to examine the relationship

between the age and price for used cars sold
in the last year by a car dealership company.

Here is the table of the data:

Car Age (in years) Price (in dollars)

4 6300

4 5800

5 5700

5 4500

7 4500

7 4200

8 4100

9 3100

10 2100

11 2500

12 2200

Now, we see that we have a negative

relationship between the car price (Y) and
car age(X) – as car age increases, price
decreases.

When we use the simple linear regression

equation, we have the following results:
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Y = Β0 + Β1X

Y = 7836 – 502.4*X

Let’s use the data from the table and create

our Scatter plot and linear regression line:

Diagram 3:

The above 3 diagrams are made with Meta

Chart.

Result Interpretation:

With an estimated slope of – 502.4, we can

conclude that the average car price

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decreases $502.2 for each year a car

increases in age.

The above simple linear regression examples

and problems aim to help you understand
better the whole idea behind simple linear
regression equation.

Problem-solving using linear regression has

so many applications in business, digital
customer experience, social, biological, and
many many other areas.

If you need more examples in the field of

statistics and data analysis or more data
visualization types, our posts “descriptive
statistics examples” and “binomial
distribution examples” might be useful to
you.
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Download the following infographic in PDF with

the simple linear regression examples:

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05/09/2023, 15:59 Simple Linear Regression Examples: Real Life Problems & Solutions

About The Author

Silvia Valcheva
Silvia Valcheva is a digital
marketer with over a decade of
experience creating content for
the tech industry. She has a strong passion
for writing about emerging software and
technologies such as big data, AI (Artificial
Intelligence), IoT (Internet of Things), process
automation, etc.

3 Comments
pepe
Hi. I really enjoy your article,
seems to me that it can help to
many students in order to improve
their skills.
Thanks,
Reply

Silvia Valcheva
I hope so!
Thanks!
Reply

shivam
solved perfectly, great article
Reply

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