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) Car Age (years) Selling Price ($000)
1 9 8.1 7 8 7.6
2 7 6 8 11 8
3 11 3.6 9 10 8
4 12 4 10 12 6
5 8 5 11 6 8.6
6 7 10 12 6 8


Required:
a. Determine the regression equation.
b. Estimate the selling price of a 10-year-old car (in $000).
c. Interpret the regression equation (in dollars).

Answer 1

ŷ = -0.47876X + 11.17724

$6.4

Explanation:

Given the data :

Car Age (years) Selling Price ($000) Car Age (years) Selling Price ($000)

1 9 8.1 7 8 7.6

2 7 6 8 11 8

3 11 3.6 9 10 8

4 12 4 10 12 6

5 8 5 11 6 8.6

6 7 10 12 6 8

The estimated regression equation using a linear regression calculator is :

y = -0.47876X + 11.17724

With - 0.47876 being the slope ; and 11.17724 being the intercept

y = predicted variable (price of car) ; x = predictor variable (Age of car)

Selling price of a 10 year old car : x = 10

ŷ = -0.47876(10) + 11.17724

Price = 6.38964

About 6.4(000) dollars ($6,400)

According to the regression equation : The starting price of cars is about $11.18 (intercept) with the proved of cars declining by a value of $0.479(negative slope value) each year.