QUESTION 2 Suppose that you are assigned a task to investigate the relationship between selling price and valuation of plots sold by a local municipality. Data was obtained for a random sample of ten plots. Plot Selling price ($'000) Valuation 1 120 72 2 100 68 3 140 72 4 150 70 5 155 75 6 100 50 7 150 58 8 200 90
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
QUESTION 2
Suppose that you are assigned a task to investigate the relationship between selling price
and valuation of plots sold by a local municipality. Data was obtained for a random sample
of ten plots.
| Plot | Selling price ($'000) | Valuation |
| 1 | 120 | 72 |
| 2 | 100 | 68 |
| 3 | 140 | 72 |
| 4 | 150 | 70 |
| 5 | 155 | 75 |
| 6 | 100 | 50 |
| 7 | 150 | 58 |
| 8 | 200 | 90 |
| 9 | 80 | 56 |
| 10 | 145 | 70 |
Required:
a) Use the method of least squares and estimate the regression equation between selling
price and valuation & Provide an interpretation for the slope coefficient?
b) Use the estimated regression equation and make a prediction for a value of the
dependent variable when the independent variable is N$ 85 000.
c) Calculate and interpret:
(i) the coefficient of determination?
(ii) Calculate and interpret the
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