Question 3

i.

X y x2 y2 xy

3.4 55 11.56 3,025 187

7.7 240 59.29 57,600 1,848
12.0 390 144.0 152,100 4,680
75 1,100 5,625 1,210,000 82,500
58 1,390 3,364 1,932,100 80,620
67 1,330 4,489 1,768,900 89,110
113 1,400 12,769 1,960,000 158,200
131 1,900 17,161 3,610,000 248,900

∑ x =467.1 ∑ y=7,805 ∑ x 2=43,622.85 ∑ y2 =10,693,725 ∑ xy =666,045

Calculations
n=8

 x̅ =
∑ x = 467.1 =58.39
8
n

 y̅ =
∑y 7,805
= =975.625
n 8
2
2 (∑ x ) 467.12
SSxx = ∑ x – = 43,622.85 - =43,622.85−27,272.80125=16,350.04875
8
n
 2
2 (∑ y ) 7,8052
SSyy = ∑ y – = 10,693,725 - =10,693,725−7,614,753.125=3,078,971.875
8
n

( ∑ x )(∑ y) (467.1)(7,805)
SSxy = ∑ xy – - =210,330.5625
=666,045 8
n
SS xy 210,330.5625
β1 = = =12.86
SS xx 16,350.04875
β0 = y̅ - β1(x̅) = 975.625 -12.86(58.39) = 224.48
Therefore, the least squares estimated regression equation is;

^y =224.48+ 12.86 x
ii. for x=100 ,
y=224.48+ 12.86 (100 )=1,510.48
iii. for y=3,500
3,500=224.48+12.86 x
3,500−224.48
x= =254.71
12.86
iv.
Test
H0: β1 = 0 (no linear relationship)
H1: β1 ≠ 0 (there is a linear relationship)
Test Statistic
β1 −0
t=
S / √ SS xx
where S;
SSE = SSyy - β1(SSxy) = 3,078,971.875 – 12.86(210,330.5625) = 374,120.8413
SSE 374,120.8413
S2 = = = 62,353.47354
n−2 8−2
S = √ 62,353.47354 = 249.71

Thus;
12.86−0
t=
249.71/ √16,350.04875
= 6.59
Rejection Rule:

Critical value t 0.05 ,n−2= t 0.05,6=2.447

Decision:

Since t > t 0.05,6, Reject H0 i.e. at 5% level of significance, there is sufficient statistical evidence to
indicate a linear relationship between energy consumption, x and Gross National Product, y.

v. The interval is;

S
β1 ± t α ,n−2
√ SS xx
249.71
12.86 ± 2.447
√ 16,350.04875
12.86 ± 4.78
Answer: (8.08, 17.64)

vi.

Finding the Coefficient of correlation (r):

SS xy 210,330.5625 210,330.5625
r= = =
√ SS xx SS yy √16,350.04875(3,078,971.875) 224,368.7595
= 0.94

vii.

Finding Coefficient of determination (r2):

SS yy −SSE
r2=
SS yy
3,078,971.875−374,120.8413
=
3,078,971.875
312,050
=
357,650
= 0.88
Interpretation: The value of r2 means the model (i.e. the estimated regression equation) is 88%
reliable for forecasting
.

viii.

x y ^y = ( ^y − ý) ( ^y − ý)2 y− ^y ( y− ^y )2
224.48+12.86x
3.4 55 268.204 -707.421 500,444.4712 -213.204 45,455.94562

7.7 240 323.502 -652.123 425,264.4071 -83.502 6,972.584004

12.0 390 378.8 -596.525 355,842.0756 11.2 125.44

75 1,100 1,188.98 213.355 45,520.35603 -88.98 7,917.4404

58 1,390 970.36 -5.265 27.720225 419.64 176,097.7296

67 1,330 1,086.1 110.475 12,204.72563 243.9 59,487.21

113 1,400 1,677.66 692.035 478,912.4412 -277.66 77,095.0756

131 1,900 1,909.14 933.515 871,450.2552 -9.14 83.5396

Total ∑ ( ^y − ý )2=2,689,666.452 ∑ ( y− ^y )2=¿ 3 73,234.964

ANOVA table and calculations:
2
SSR= ∑ ( ^y − ý ) = 2,689,666.452

SSE=∑ ( y− ^y )2 = 3 73,234.9648

SSR
MSR = = 2,689,666.452
1
SSE 373,234.9648
MSE = = = 62,205.82747
n−2 8−2
MSR 2,689,666.452
F= = = 43.24
MSE 62,205.82747

Source of df SS MS F
variation
Regression 1 2,689,666.452 2,689,666.452 43.24

Error 6 373,234.9648 62,205.82747

Total 7 3,062,901.416 2,751,872.279 43.24