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Least squares regression to predict amount spend

Super Markets, Inc. is considering expanding into the Scottsdale, Arizona, area. Ms. Luann Miller, Director of Planning, must present an analysis of the proposed expansion to the operating committee of the board of directors. As a part of her proposal, she needs to include information on the amount people in the region spend per month for grocery items. She would also like to include information on the relationship between the amount spent for grocery items and income. She gathered the following sample information.

Monthly Monthly Monthly Monthly
Household Amount Income Household Amount Income

1 $555 $4,388 21 $ 913 $6,688
2 489 4,558 22 918 6,752
3 458 4,793 23 710 6,837
4 613 4,856 24 1,083 7,242
5 647 4,856 25 937 7,263
6 661 4,899 26 839 7,540
7 662 4,899 27 1,030 8,009
8 675 5,091 28 1,065 8,094
9 549 5,133 29 1,069 8,264
10 606 5,304 30 1,064 8,392
11 668 5,304 31 1,015 8,414
12 740 5,304 32 1,148 8,882
13 592 5,346 33 1,125 8,925
14 720 5,495 34 1,090 8,989
15 680 5,581 35 1,208 9,053
16 540 5,730 36 1,217 9,138
17 693 5,943 37 1,140 9,329
18 541 5,943 38 1,265 9,649
19 673 6,156 39 1,206 9,862
20 676 6,603 40 1,145 9,883

a. Let the amount spent be the dependent variable and monthly income the independent
variable. Create a scatter diagram, using a software package.
b. Determine the regression equation. Interpret the slope value.
c. Determine the coefficient of correlation. Can you conclude that it is greater than 0?

Solution Preview

Hello

Please see the excel sheet attached for regression analysis. IN the regression equation amount spent is the dependent variable and monthly income the ...

Solution Summary

The solution is about relationship between monthly income and amount spend by a household. The relationship is identified using least square regression.

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