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Student’s Name
Professor’s Name
Institute Name
Date
Use of Regression Analysis and Interpretation of real-world questions

Businesses can use the regression analysis to find the correlation between two variables

in the data set by using the scatter plots, prediction about the data trends by using the regression

equation, analyze the data in terms of underestimation and overestimation from predicted

variables, and find the statistical significance of data from p-values and R-values or R squared

values. In the given context, the data between advertisement and sales is represented by

regression analysis, which explains all the above-mentioned points in the real world. For

example, a scatter plot between the advertisement and sales provides me with the trends for

multiple years or months, which can be understood visually as a business owner.

Let’s say, for the ten months of advertisement expense and sales revenue, as a business

owner, it is easy to identify the months in which advertisements bring more sales revenue. Also,

it highlights any outliers which show no correlation or any significant effect on sales revenue

against the expense of the advertisement. In the real world, it is very useful for companies to

identify the correlation, outliers, and data trends between advertisement expense and sales

revenue, which helps business owners to identify the parameters such as market segmentation,

consumer behavior, and profit streams in different months that contributes most of the sales

(BYJU).

The values of R-squares and R-values help the business owners to find the variation in

the response model and determine the coefficient estimates and biased or unbiased predictions.
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For example, the value of R-square is 0.82, which shows that the given model explains the

variation in the response variable by more than 80 percent, which means that a business owner

can use the data between the sales revenue and advertisement to take business decisions such as

developing of advertisement strategies aligned with the sales revenue, finding new ways for

advertisements, and analyze the trends between the sales revenue and different advertisement

channels in real-world (Jim). Finally, the regression equation helps the business owner to find the

predict the advertisement strategies that add more profit in sales, and prevent risk for future

spending on advertisements expense. For example, a business owner finds a new advertisement

channel, or develops a new way to target the segmented, but looking to avoid the risk of

spending on advertisement costs upfront. Therefore, a business owner can use the regression

equation to check in advance whether the new way of advertisement would be correlated with

the sales revenue. The values determine the sales revenue for advertisement expense or new

advertisement strategy or channel helps the business owner to take strategic decision and avoid

any unnecessary expense (Stephanie).

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References

Jim Frost. How To Interpret R-squared in Regression Analysis. Statistics Byjim.2019

https://statisticsbyjim.com/regression/interpret-r-squared-regression/

BYJUS. Scatter Plot, 2022

https://byjus.com/maths/scatter-plot/

Stephanie Glen. Regression Equation: What it is and How to use it. Statistics How To. 2022

https://www.statisticshowto.com/probability-and-statistics/statistics-definitions/what-is-a-

regression-equation/