Number of Sales People Working Sales (in $1000) 10 3 11 7 13 9 14 10 18 10 20 12 20 15 22 16 22 20 26
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
Bookstore sales revisited Recall the data we saw in
Chapter 6, Exercise 3 for a bookstore. The manager wants
to predict Sales from Number of Sales People Working.Here is the
Sales People Working.a) Write the regression equation. Define the variables
used in your equation.
b) What does the slope mean in this context?
c) What does the y-intercept mean in this context? Is it
meaningful?
d) If 18 people are working, what Sales do you predict?
e) If sales for the 18 people are actually $25,000, what is
the value of the residual?
f) Have we overestimated or underestimated the sales?
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