Patterns and Modeling

Models help us describe and summarize relationships between variables. Understanding how process variables relate to each other helps businesses predict and improve performance. For example, a marketing manager might be interested in modeling the relationship between advertising expenditures and sales revenues.

Consider the following dataset:

Construct a scatter plot with this data. Do you observe a relationship between both variables?

Use Excel to fit a linear regression line to the data and answer the following questions:

What is the fitted regression model? (Hint: You can follow the steps outlined on page 497 of the textbook.)
What is the slope? What does the slope tell us? Is the slope significant?
What is the intercept? Is it meaningful?
What is the value of the regression coefficient, r?
What is the value of the coefficient of determination, r^2?
What does r^2 tell us?

Sample Solution