A fast-food chain decided to carry out an experiment to assess the influence of advertising expenditure on sales. Different relative changes in advertising expenditure, compared to the previous year, were made in eight regions of the country, and resulting changes in sales levels were observed the accompanying table shows the results. Increase in advertising expenditure (%) 0 5 15 20 25 30 35 40 Increase in sales (%) 5 10 18 25 35 50 60 65 What does “R square” measure? What is its value and interpret it?
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
A fast-food chain decided to carry out an experiment to assess the influence of advertising expenditure on sales. Different relative changes in advertising expenditure, compared to the previous year, were made in eight regions of the country, and resulting changes in sales levels were observed the accompanying table shows the results.
|
Increase in advertising expenditure (%) |
0 |
5 |
15 |
20 |
25 |
30 |
35 |
40 |
|
Increase in sales (%) |
5 |
10 |
18 |
25 |
35 |
50 |
60 |
65 |
What does “R square” measure? What is its value and interpret it?
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