Question

The Toyota Camry is one of the best-selling cars in North America. The cost of a previously owned Camry depends on many factors, including the model year, mileage, and condition. To investigate the relationship between the car’s mileage and the sales price for Camrys, the following data show the mileage and sale price for 19 sales (PriceHub web site, February 24, 2012).Miles(1000s) Price($1,000s) 22 16.2 29 16.0 36 13.8 47 11.5 63 12.5 77 12.9 73 11.2 87 13.0 92 11.8 101 10.8 110 8.3 28 12.5 59 11.1 68 15.0 68 12.2 91 13.0 42 15.6 65 12.7 110 8.3A. Test whether each of the regression parameters b0 and b1 are equal to zero at 0.01 level of significance.B. What are the correct interpretations of the estimated regression parameters?C. Are these interpretations reasonable?

Answer 1

Explanation:

Hello!

Given the variables

Y: Cost of a previously owned Camry.

X: Mileage of a previously owned Camry.

Scatter plot in attachment.

As you can see in the scatter plot, the price of the previously owned Camry decreases as their mileage increases this suggest that there is a negative linear regression between these two variables.

Hypothesis test for the y-intercept

H₀: β₀ = 0

H₁: β₀ ≠ 0

Level of significance α: 0.01

p-value < 0.0001

The decision is to reject the null hypothesis. You can conclude that the population mean of the cost of a previously owned Camry, when the mileage is zero, is different from zero.

H₀: β = 0

H₁: β ≠ 0

Level of significance α: 0.01

p-value: 0.0003

The decision is to reject the null hypothesis. You can conclude that the population mean of the cost of a previously owned Camry is modified when the mileage increases in one unit.