Question

The following estimated regression equation relating sales to inventory investment and advertising expenditures was given.

ŷ = 25 + 11x₁ + 9x₂

b) Compute R_a². (Round your answer to two decimal places.)

(c)

Does the model appear to explain a large amount of variability in the data? Explain. (For purposes of this exercise, consider an amount large if it is at least 55%. Round your answer to the nearest integer.)

The adjusted coefficient of determination shows that   % of the variability has been explained by the two independent variables; thus, we conclude that the model does explain a large amount of variability.

Answer 1

Given data. SST = 16000 and SSR = 11360.

Estimatedd regression equation based on 10 observations y' = 25 + 11x1 + 7X2

A)

R^2 = SSR / SST = 11360/16000 = .71

B)

To compute r - square, Ra^2

Ra^2 = 1 - (1 - R^2)*(n-1/n-p-1)

Ra^2 = 1 - (1 - 0.71) * (10 -1)/(10 -2-1) = 0.63

C)

Adjustment Co-efficient of determination shows 63% of the variability hasbeen explained by the model explain a large amount of variability. therefore, the estimated regression may not provide a good lift