BPA CSUB Prof. Yong Choi Midwest Distribution Create scatter plot 1. Find out whether there is a linear relationship pattern or not Easy and simple using the chart function 2. Does square footage of the house affect its sales price? Determined by the strength of the linear relationship between two variables based on sample. There are three ways to measure. Next slide for details. Measure the linear relationship 1. 2. Review sample correlation coefficient: multiple R (simple and easy) Test the coefficient of determination, noted as ρ2 (rho-squared) H0: The independent variable does not explain a significant H0: ρ2 = 0 portion of the variation in the dependent variable HA: ρ2 ≠ 0 H : The independent variable does explain a significant A portion of the variation in the dependent variable 3. Test the regression slope coefficient H0: β1 = 0 (no linear relationship) HA: β1 ≠ 0 (linear relationship does exist) Midwest Distribution 2. Does number of years with the company help explain the variation in sales from employee to employees? What should we look for or use? Midwest Distribution 3. What is the value of b1 (Estimate of the regression slope)? and what does it tell you? 4. Predict the sales with 20 years experience Midwest Distribution 5. What is the meaning of b0 = 175.83? What does it tell you?