Assignment NO.

Topic: Regression Analysis

Q#1

The owner of retailing organization is interested in the relationship between price at which commodity is
offered for sale and the quantity sold. The following sample data have been collected.

Price 25 45 30 50 35 40 65 75 70 60
Quantity Sold 118 105 112 100 111 108 95 88 91 96
• Using the method of least squares, determine the equation of the estimated regression line.
• Test at 5% level of significance whether there is any evidence of linear relationship between price
and quantity sold?

Q#2

An agent of residential real estate company in a large city has business objective of developing more
accurate estimates of the monthly rental cost for apartments. Toward that goal the agent would like to use
the size of an apartment, as defined by square footage to predict the monthly rental cost. The agents
selects a sample of 10 apartments in a particular residential neighborhood and collects the following data.

Size 850 1450 1085 1232 718 1485 1136 726 700 956
(sq. ft.)
Rent 1950 2600 2200 2500 1950 2700 2650 1935 1875 2150
($)
• Use the least square method to determine the regression coefficients of 𝑏0 and 𝑏1 .
• Interpret the meaning of 𝑏0 and 𝑏1 .
• At the 5% level of significance is there evidence of linear relationship between the size of the
apartment and the monthly rent?

Q#3

The marketing Manager of a large super market chain has the business objective of using shelf space most
efficiently. Towards that goal, she would like to use shelf space to predict the sales of the food. Data are
collected from a random sample of 12 equal sized stores, with the following result:-

Store Shelf space(x) in sq.ft. Weekly sales (Y) in $

1 5 160
2 5 220
3 5 140
4 10 190
5 10 240
6 10 260
7 15 230
8 15 270
9 15 280
10 20 260
11 20 290
 12 20 310
Fit a regression line to above set of data.

• Interepret the meaning of Y intercept 𝑏0 .

• Interpret the meaning of slope coefficient of 𝑏1 .
• Predict the weekly sales of food for stores with 8 sq ft. of shelf space for food.
• At 5% level of significance is there evidence of linear relationship between shelf space and sales?

Q#4

A random sample of 8 auto drivers insured with a company and having similar auto insurance policies was
selected. The following table lists their driving experience (in years) and the monthly auto insurance
premium (in dollars) paid by them

Driving experience Monthly auto insurance

(years) premium ($)
5 64
2 87
12 50
9 71
15 44
6 56
25 42
16 60
• Fit the least square regression line by taking into account that the insurance premium depend on
driving experience.
• Predict the monthly insurance premium for a driver with 10 years of driving experience .
• Compute the standard deviation of errors.
• Test at 5% level of significance if β is negative.