Managerial Economics

TERM REPORT

Subject: Managerial Economics

Submitted: 31st May 2010 Topic: Multiple

Regression Analysis
Lecturer: Ahsan Rizavi
 Akash Kumar

Group Members Rahat Mehboob

Bilal Shahwani

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 Table of Content

Introduction 1

Multiple Regression Equation 1

Graphical Representation2

Data Calculation 6

Hypothesis Testing 7

F-Test 9

Appendix 10

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 Introduction
Transport and Communication Sector

Description:

This data has been collected from the Federal Bureau of

Statistic’s Reports and the purpose of this collection is to study
the impact of total travelers and distance travelled to the revenue
of Pakistan International Airlines.

Source:

The source of the data collection is FBS Pakistan.

http://finance.gov.pk/admin/images/survey/chapters/14-Transport09.pdf

Variables:

Y = revenue (in thousands)

X1 = distance travelled (in kilometers)

X2 = no of passengers (in thousands)

Multiple Regression Equation

General Equation:

Y^ = bo + b1x1 + b2x2

Derived Equation:

Y^ = -14696.21 + 0.089 X1 + 11.005 X2

Graphical Representations
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Graph #1

Graphical representation of the revenue (Y) of PIA over the years.

Graph #2

Graphical representation of the distanced travelled (X1) by PIA

aircrafts.

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Graph #3

Graphical representation of the no. of passengers (X2) who

travelled through PIA.

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Graph #4

Representation of relationship between two variables; one of

which is dependant variable (Y - Revenue) and the other one is
independent variable (X1 – Distance Travelled).

Partial Regression Plot

Graph #5

This graph represents the relationship between two variables; one

of which is dependant variable (Y - Revenue) and the other one is
independent variable (X2 – No. of Passengers).

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 Partial Regression Plot

Data Calculation
Regression Statistics

bo -14696.21

b1 0.089

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b2 11.005

R Square 0.793

Adjusted R Square 0.769

Observations 20

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 Hypothesis Testing
T1:

Ho: b1 =0

HA: b1 ≠0

tα , n-k = t0.05, 20-3

Following values of t are found with the help of t distribution

table.

t0.05, 17 = 2.110

With the help of available data we can calculate t1 which is given

below:

t1 = 3.27

Result:

Ho is rejected.

Interpretation:

We conclude that Ho is rejected which means that b1 is

statistically significant.

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T2:

Ho: b2 =0

HA: b2 ≠0

tα , n-k = t0.05, 20-3

Following values of t are found with the help of t distribution

table.

t0.05, 17 = 2.110

With the help of available data we can calculate t1 which is given

below:

t2 = 6.81

Result:

Ho rejected.

Interpretation:

We conclude that Ho is rejected which means b2 is statistically

significant.

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 F-Test
Formula:

F = R2 / (k-1) / (1- R2) / (n-k)

Ho: b1 = b2 = 0

HA: b1 = b2 ≠ 0

Through the table we find that values of F that are 0.051 and
3.59; now using the available data we calculate the value of F to
be:

F = 32.62

Result:

Ho rejected.

Interpretation:

Through F test we conclude that HO is rejected and HA is accepted

which shows that collective parameters are significant.

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 Appendix

Data:

DEPENDENT
INDEPENDENT VARIABLES
VARIABLE
X1 = Distance
Y =Revenue X2 = Passengers
Travelled
(in thousands) (in thousands)
(in km)
60,255 255,336 5,033
66,570 258,558 5,584
69,377 270,536 5,780
69,024 303,321 5,645
72,544 353,221 5,517
74,288 310,205 5,399
78,796 336,230 5,883
73,663 325,744 5,531
70,697 335,348 5,086
75,483 332,417 4,914
76,212 317,213 5,297
40,158 324,815 2,729
62,974 291,428 4,290
63,863 311,152 4,391
58,146 294,082 4,796
80,699 354,664 5,132
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 87,273 343,525 5,828
80,302 446,570 5,732
80,759 383,574 5,415
79,580 311,131 5,617

Reference:

Ministry of Finance – Official Website

http://finance.gov.pk/finance_survery_chapter.aspx?id=21

File(s) used: Transport & Communication report by Mr. Habib-ur-

Rehman

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