Carpet City wants to develop a means to forecast its carpet sales. The store manager believes that the store's sales are directly related to the number of new housing starts in town. The manager has gathered data from county records on the monthly house construction permits and from store records on the monthly sales.
a. Develop a linear regression model for these data and forecast carpet sales if 30 constructive permits for new homes are filed.
b. Determine the strength of the causal relationship between monthly sales and new home construction by using correlation.
The data are given in the attachment.
The solution provides step by step method for the calculation of correlation coefficient . Formula for the calculation and Interpretations of the results are also included.