Answer to Question #114157 in Statistics and Probability for Nimra

Question

Price = 12,15,18,25,22,18,30.
Demand = 65,60,50,41,40,56,45.
Required following.
1) coefficient of correlation
2) coefficient of determination
3) probable Error
4) Interpretation

Answer 1

1) X Values: ∑ = 140,Mean = 20

∑(X - Mx)² = SS_x = 226

Y Values: ∑ = 357,Mean = 51

∑(Y - My)² = SS_y = 560

X and Y Combined

N = 7

∑(X - M_x)(Y - M_y) = -297

r = ∑((X - M_y)(Y - M_x)) / $\sqrt{((SSx)(SSy))}$

r = -297 / $\sqrt{((226)(560))}$ = -0.8348

2) cd=r²=0.69697

3)using formula (where 0.674 - const): e=0.674 *(1-r²) /$\sqrt{N}$ =0.0771

​4)A strong downhill (negative) linear relationship