Discuss the application of simple linear regression

Expert Solution

Application:

Simple Linear regression is a very powerful statistical technique and can be used to generate insights on consumer behaviour, understanding business and factors influencing profitability. Linear regression can be used in business to evaluate trends and make estimates or forecasts.

Linear regression can also be used to analyze the marketing effectiveness, pricing and promotions on sales of a product. For instance, if company ABC wants to know if the funds that they have invested in marketing a particular brand has given them substantial return on investment, they can use linear regression.

Linear regression can also be used to assess risk in financial services or insurance domain. For example, a car insurance company might conduct a linear regression to come up with a suggested premium table using predicted claims to insured Declared value ratio. The risk cn be assessed based on the attributes of the car, driver information.

While Linear regression has limited applicability in business situation because it can work only when the dependent variable is of continuous nature, it still is a very well known technique in the situation it can be used. It assumes a linear relationship between the dependent and independent variables.

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orchestra answered 1 year ago

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