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BS - Regression

The document explains simple linear regression analysis, a statistical method for modeling the relationship between two variables using a straight line. It includes a case study on Coca-Cola, demonstrating how advertising spend can predict sales, with calculations for slope and intercept. The document also discusses the limitations of simple regression and concludes that this method is valuable for making data-driven decisions.

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poorvanshigupta30
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10 views14 pages

BS - Regression

The document explains simple linear regression analysis, a statistical method for modeling the relationship between two variables using a straight line. It includes a case study on Coca-Cola, demonstrating how advertising spend can predict sales, with calculations for slope and intercept. The document also discusses the limitations of simple regression and concludes that this method is valuable for making data-driven decisions.

Uploaded by

poorvanshigupta30
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Simple Linear

Regression
Analysis

Presented By:Poorvanshi Gupta


Nidhi Sharma
What is
01 Regression
Analysis?
Regression analysis is a statistical method used to
determine the relationship between two or more
variables. It predicts one variable (dependent)
based on another variable (independent).
Simple Linear
Regression
A statistical method that models the relationship between two variables by fitting a straight
line to the observed data.

Formula:

● y=mx+b
Where:

● y = Dependent Variable (e.g., sales)


● x = Independent Variable (e.g., advertising spend)
● m = Slope of the line (change in yy per unit change in x)
● b = Intercept (value of y when x=0)
Case Study: Coca-Cola
Coca-Cola is one of the most recognized brands worldwide,
heavily investing in advertising to drive sales.

Objective:

● To predict Coca-Cola's sales based on their advertising


expenditures.
Advertising Spend vs.
Sales Data:

Advertising Spend (X) Sales (Y)

$10,000 $50,000

$20,000 $80,000

$30,000 $120,000

$40,000 $160,000

$50,000 $200,000
Calculating the Regression Line
Slope (m):

● Represents the change in sales for each additional dollar spent on advertising.

Intercept (b):

● Represents the expected sales when no money is spent on advertising.

Example Calculation:

● Slope (m): 4
● Intercept (b): 2000
● Regression Equation:
○ Sales=4×(Advertising Spend)+2000
Calculating the Regression Line
Advertising Spend (X) Sales (Y) X*Y X2

$10,000 $50,000 500000000 10,00,00,000

$20,000 $80,000 1600000000 40,00,00,000

$30,000 $120,000 3600000000 90,00,00,000

$40,000 $160,000 6400000000 1,60,00,00,000

$50,000 $200,000 10000000000 2,50,00,00,000

ΣXY = ΣX2 =
ΣX = 1,50,000 ΣY = 6,10,000
21,600,000,000 5,500,000,000
Calculating the Regression Line
Putting the above values in the slope equation

𝑵 ( 𝜮 𝑿𝒀 ) − 𝜮 𝑿 𝜮 𝒀 N = Number of data points


𝒎= X = Advertising Spend
𝑵 ( 𝜮 𝑿𝟐 ) − ( 𝜮 𝑿 )
𝟐
Y = Sales

𝟓 ( 21,600,000,000 ) −(𝟏 , 𝟓𝟎 , 𝟎𝟎𝟎 ∗𝟔 ,𝟏𝟎 , 𝟎𝟎𝟎)


𝒎= 𝟐
𝟓 (5,500,000,000 ) − ( 𝟏 ,𝟓𝟎 ,𝟎𝟎𝟎 )

≈4
Calculating the Regression Line
Putting the above values in the intercept equation

𝒃=
∑𝒀 − 𝒎( ∑ 𝑿 )
𝑵

𝟔 , 𝟏𝟎 , 𝟎𝟎𝟎 −𝟒 (𝟏 , 𝟓𝟎 , 𝟎𝟎𝟎)
𝒃=
𝟓

𝒃 =𝟐 , 𝟎𝟎𝟎
Calculating the Regression Line
Putting the above values in the regression equation

Sales=4×(Advertising Spend)+2000

Sales= 4×(60)+2000

Sales= 2240

Interpretation : Coca-Cola is predicted to generate


$22400000 in sales with a $60,000 advertising budget.
Evaluating the Model

• R-squared (R²):

Indicates the proportion of variance in the dependent variable explained


by the independent variable.

• Interpretation:

A high R² (close to 1) means the model fits well.


For this example, an R² of 0.9 indicates that 90% of the variability in sales
is explained by advertising spend.
Limitations of Simple Regression
Line

• Only considers one independent variable.


• Assumes a linear relationship between the variables.
• Does not account for other influencing factors (e.g., market trends,
competition).
Conclusion

Simple linear regression is a fundamental statistical method that


models the relationship between two variables, typically an
independent variable (predictor) and a dependent variable (outcome).
This method helps to predict future outcomes based on existing data,
making it a powerful tool for analyzing trends, establishing patterns,
and making data-driven decisions. The core idea is to fit a straight line
through a scatter plot of data points, where the line represents the best
approximation of the relationship between the variables.
THANKYOU!

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