Question

Discuss the role of regression analysis in business by using examples of how these models might work to make predictions. In your discussion, consider the various components of the output and how it might be of value to understanding the data.

Answer 1

Regression analysis is a statistical technique used to find the relations between two or more variables. In regression analysis one variable is independent and its impact on the other dependent variables is measured. When there is only one dependent and independent variable we call is simple regression. On the other hand, when there are many independent variables influencing one dependent variable we call it multiple regression.

Let’s understand it with a simple example.

Suppose we have a lemonade business. A simple linear regression could mean finding a relationship between the revenue and temperature, with revenue as the dependent variable. In case of multiple variable regression, we can find the relationship between temperature, pricing and number of workers to the revenue. Thus, regression analysis can analyze the impact of varied factors on business sales and profits.