An analysis of price of crude oil ($/barrel) and gasolineprices at the pump ($/gallon) from 1976 to 2004 founda correlation coefficient of 0.829.Which of the following is a true statement?a) Since the correlation coefficient is high, there is alinear relationship between crude oil prices and pricesat the pump.b) Since the correlation coefficient is only moderatelyhigh, the relationship between crude oil prices andprices at the pump is probably not linear.c) For every one dollar increase in crude oil price perbarrel, the gasoline price at the pump is expected toincrease by $0.829 per gallon.d) 68.7% of the price of a gallon of gasoline can beexplained by crude oil prices.e) None of the statements A–D is true.
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
An analysis of price of crude oil ($/barrel) and gasoline
prices at the pump ($/gallon) from 1976 to 2004 found
a
Which of the following is a true statement?
a) Since the correlation coefficient is high, there is a
linear relationship between crude oil prices and prices
at the pump.
b) Since the correlation coefficient is only moderately
high, the relationship between crude oil prices and
prices at the pump is probably not linear.c) For every one dollar increase in crude oil price per
barrel, the gasoline price at the pump is expected to
increase by $0.829 per gallon.
d) 68.7% of the price of a gallon of gasoline can be
explained by crude oil prices.
e) None of the statements A–D is true.
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