Question

In: Statistics and Probability

A statistical program is recommended. Car manufacturers produced a variety of classic cars that continue to...

A statistical program is recommended. Car manufacturers produced a variety of classic cars that continue to increase in value. Suppose the following data is based upon the Martin Rating System for Collectible Cars, and shows the rarity rating (1–20) and the high price ($1,000) for 15 classic cars.

Model Rating Price ($1,000)
A 14 62.0
B 19 1,325.0
C 17 165.0
D 13 70.0
E 19 3,975.0
F 16 225.0
G 16 325.0
H 18 1,625.0
I 17 450.0
J 15 102.5
K 18 400.0
L 18 975.0
M 19 2,650.0
N 17 425.0
O 16 100.0

(b)

Develop an estimated multiple regression equation with x = rarity rating and

x2

as the two independent variables. (Round b0 and b1 to the nearest integer and b2 to one decimal place.)ŷ =

(c)

Consider the nonlinear relationship shown by equation (16.7):

E(y) = β0β1x

Use logarithms to develop an estimated regression equation for this model. (Round b0 to three decimal places and b1 to four decimal places.)

log(ŷ) =

(d)

Do you prefer the estimated regression equation developed in part (b) or part (c)? Explain.

The model in part (b) is preferred because r2 is higher and the p-value is lower.

The model in part (c) is preferred because r2 is higher and the p-value is lower.    

The model in part (c) is preferred because r2 is lower and the p-value is lower.

The model in part (b) is preferred because r2 is lower and the p-value is lower.

Solutions

Expert Solution

b)

We will be applying the Linear regression model here, it can be done by using the function =LINEST(y_value, x_value, TRUE, TRUE) where y_values contain values of Price(y) here and x_values have Rating(x) and Rating square(x**2) values.

Select 5 rows and 3 columns and then write the formula in the first cell and after that, press Shift + Ctrl + Enter.    

The equation comes out to be -
y = 34473.67 - 4653.34*x + 156.15*x**2  

c)

We will be applying the Linear regression model here, it can be done by using the function =LINEST(y_value, x_value, TRUE, TRUE) where y_values contain values of log of price here and x_values have ratings values.

Select 5 rows and 2 columns and then write the formula in the first cell and after that, press Shift + Ctrl + Enter.    

The equation comes out to be -
log(y) = -5.5 + 0.68*x  

d)

The model in part c have the r**2 value of 0.79, which is higher than r**2 value of 0.70 in part b. Hence, it will be used.

The model in part (c) is preferred because r2 is higher and the p-value is lower.


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