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Graph Analysis 1 - Linear Regression

The document discusses two problems involving regression analysis: one analyzing the relationship between the age and price of Corvettes, and the other examining the correlation between monthly e-commerce sales and online advertising costs. It provides a regression equation for both scenarios, identifies dependent and independent variables, and interprets the results, including predictions based on the regression equations. The analysis reveals a negative relationship between Corvette age and price, and a positive relationship between advertising costs and e-commerce sales.

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12 views6 pages

Graph Analysis 1 - Linear Regression

The document discusses two problems involving regression analysis: one analyzing the relationship between the age and price of Corvettes, and the other examining the correlation between monthly e-commerce sales and online advertising costs. It provides a regression equation for both scenarios, identifies dependent and independent variables, and interprets the results, including predictions based on the regression equations. The analysis reveals a negative relationship between Corvette age and price, and a positive relationship between advertising costs and e-commerce sales.

Uploaded by

begarinagaiah59
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Problems based on Graph Reading

Q.1.
Ten Corvettes between 1 and 6 years old were randomly selected from the classified ads of
The Arizona Republic. The following data were obtained, where x denotes age, in years,
and y denotes price, in hundreds of dollars.

Regression equation for the data is,


y= 291.602 − 27.9029x.
Answer below questions based on above information:

A) Graph the regression equation and the data points.


B) What is the dependent variable & independent variable in this graph?
C) Describe the apparent relationship between age and price for Corvettes.
D) Identify the predictor and response variables.
E) Identify outliers.
F) Use the regression equation to predict the price of a 2-year-old Corvette & a 3-year-old
Corvette.
G) What does the slope of the regression line represent in the context of the data?
H) What does the y-intercept of the regression line represent in the context of the data?
I) Which kind of relationship does this graph indicate?

Solution:
A)
For x = 1, y = 291.602 – 27.9029(1) = 263.6991
For x = 3, y = 291.602 – 27.9029(3) = 207.8933
Plot the graph using above calculated points.

B) What is the dependent variable & independent variable in this graph?


The dependent variable is typically represented on the y-axis. In a linear regression graph, it
represents the variable we are trying to predict or understand based on the independent
variable.
The independent variable is typically represented on the x-axis. It is the variable that we are
using to predict or explain changes in the dependent variable.

C) Describe the apparent relationship between age and price for Corvettes.
The price for Corvettes tends to decrease as they get older (as age increases).

D) Identify the predictor and response variables.


The predictor variable is age. The response variable is price.

E) Identify outliers.
There do not appear to be any outliers.

F) Use the regression equation to predict the price of a 2-year-old Corvette & a 3-year-old
Corvette.
For a 2-year-old Corvette, y = 291.602 – 27.9029(2) = 235.7962 or $23,579.62.
For a 3-year-old Corvette, y = 291.602 – 27.9029(3) = 207.8933 or $20,789.33.

G) What does the slope of the regression line represent in the context of the data?
The slope of the regression line represents the rate of change of the dependent variable
with respect to the independent variable. It indicates how much the dependent variable is
expected to change for a one-unit increase in the independent variable.

H) What does the y-intercept of the regression line represent in the context of the data?
The y-intercept of the regression line represents the value of the dependent variable when
the independent variable is zero. It is the predicted value of the dependent variable when
the independent variable has no effect.

I) Which kind of relationship does above graph indicate?


The graph indicates a strong negative relationship between the variables X and Y.
This means that as the value of X increases, the value of Y tends to decrease, and the data
points closely follow a downward trend or negative slope.
Q.2
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.
Find the equation of the straight line that fits the data best & interpret the graph.
The following table represents the survey results from the 7 online stores.

Solution:
We can see that there is a positive relationship between the monthly e-commerce sales (Y)
and online advertising costs (X).

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:

The Scatter plot shows how much one variable affects another. In our example, above
Scatter plot shows how much online 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
(Calculate B0 and B1 using the formula taught.)
Now, we have to see our regression line:
Graph of the Regression Line:

Linear regression aims to find the best-fitting straight line through the points. The best-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 is a simple linear regression example for a positive relationship in business.

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