Question

The owner of Maumee Ford-Volvo wants to study the relationship between the age of a car and its selling price. Listed below is a random sample of 12 used cars sold at the dealership during the last year.

Car				Age (years)				Selling Price ($000)
	1				11				12.1
	2				8				10.5
	3				14				5.7
	4				17				4.9
	5				9				5.0
	6				8				13.4
	7				10				10.5
	8				14				9.0
	9				13				9.0
	10				17				4.5
	11				6				12.5
	12				6				11.5

1-Determine the regression equation.

a=

b=

2- Estimate the selling price of an 7-year-old car (in $000).

3-Interpret the regression equation (in dollars).

Answer 1

Age(x)	Price(y)	xy	x2
11	12.1	133.1	121
8	10.5	84	64
14	5.7	79.8	196
17	4.9	83.3	289
9	5	45	81
8	13.4	107.2	64
10	10.5	105	100
14	9	126	196
13	9	117	169
17	4.5	76.5	289
6	12.5	75	36
6	11.5	69	36
133.00	108.60	1100.90	1641.00	Total
11.08333	9.05			Average

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y = a + bx

  

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y = 15.877 - 0.616*7= 11.565

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By Increasing one unit in age there is on an average 0.616 unit decrease in Price