Problem – 1

Sagor Rice Mil is a renowned company of our Country. They produce different
types of rice according to the demand of the buyers. They use Regression analysis
to find out the relationship between the Demand of the rice & the Price of Rice.

Data of Demand & Supply of Rice are given below:

X Y
Demand(Metric Ton) Price (Thousand
Taka)
10 15
12 20
14 20
16 25
20 30

Requirements:

 Find the equation of Regression of Price on Demand

 Estimate the relationship between demand & price in relative term
 Assess the explanatory power of the independent variable

Interpretation of the results should be shown.

Solution:

 The required equation is:

Y = a + b X; where
Y – Price (Dependent/ Criterion Variable)
X - Demand (Independent/ Explanatory/ Predictor Variable)
a – Constant/ Intercept
b – Regression Co-efficient
For finding out the values of a & b, we solve the following formulas:

∑XY - ∑X*∑Y / n
b=
∑X^2 – ( ∑X )^2 / n

∑Y - b∑X
a=
n

or a=Y–bX

X Y XY X^2 Y^2
10 15 150 100 225
12 20 240 144 400
14 20 280 196 400
16 25 400 256 625
20 30 600 400 900
72 110 1670 1096 2550

So, ∑XY - ∑X*∑Y / n

b=
∑X^2 – ( ∑X )^2 / n

1670 – 72*110/5
=
1096 – (72)^2/5

= 1.3892
 ∑Y - b∑X
a=
n

or a=Y–bX

∑Y ∑X
a= - b*
n n

110 110
= - 1.3892*
5 5

= 1.251

We get,
b= 1.3892
Putting the value of b in the formula we get,
a = 1.251

Hence the desired equation is : Y = 1.251 + 1.4892 X

Interpretation:

If the demand increases for 1 metric ton, price of the product increases for
1.3892 thousand taka.

 The relationship between the variables in relative term can be

estimated with the help of the co-efficient of correlation, r.

∑XY - ∑X*∑Y / n
r=
 √ {∑X^2 – (∑X)^2 /n} {∑Y^2 – (∑Y)^2 /n}

1670 – 72*110 / 5
r=
√ {1096 – (72)^2 /5} {2550 – (110)^2 /5}

r = 0.95

Interpretation:

r = 0.95 indicates a very high degree of positive relationship between demand &
price.

 The explanatory power of the independent variable can be

assessed by the co-efficient of determination
(r^2), r^2 = 0.931

Interpretation:

r^2 = 0.931 indicates that 93.1% of the variation in the price can be explained by
the variation in the demand.
 60

50

40

30 Price
Demand
20

10

0
1 2 3 4 5

Problem 2:

AB Bank is a renowned Banking company in our Country. They offer different

interest rates according to the different amount of savings deposit of the savers.
They use Regression analysis to find out the relationship between the interest
rates & Savings.

Data of interest rates & Savings are given below:

X Y
Interest rate(%) Savings(Lakh Taka)
5 15
8 25
10 30
12 35
15 50

Requirements:
  Find the equation of Regression of savings on interest rate.
 Estimate the relationship between interest rate & saving in relative term.
 Assess the explanatory power of the independent variable

Interpretation of the results should be shown.

Solution:

 The required equation is:

Y = a + b X; where
Y – Savings (Dependent/ Criterion Variable)
X - Interest Rate
(Independent/ Explanatory/ Predictor Variable)

a – Constant/ Intercept
b – Regression Co-efficient

For finding out the values of a & b, we solve the following formulas:

∑XY - ∑X*∑Y / n
b=
∑X^2 – ( ∑X )^2 / n

∑Y - b∑X
a=
n

or a=Y–bX
 X Y XY X^2 Y^2
5 15 75 25 225
8 25 200 64 625
10 30 300 100 900
12 35 420 144 1225
15 50 750 225 2500
50 155 1745 558 5475

So, ∑XY - ∑X*∑Y / n

b=
∑X^2 – ( ∑X )^2 / n

1745 – 50*155/5
=
558 – (50)^2/5

= 3.3621

∑Y - b∑X
a=
n

or a=Y–bX

∑Y ∑X
a= - b*
n n

155 50
= - 3.3621*
5 5

= -2.621
We get,
b= 3.3621

Putting the value of b in the formula we get,

a = -2.621

Hence the desired equation is : Y = -2.621 + 3.3621 X

Interpretation:

If the interest rate increases for 1%, then the savings increases for 3.3621 Lakh
taka.

 The relationship between the variables in relative term can be

estimated with the help of the co-efficient of correlation, r.

∑XY - ∑X*∑Y / n
r=
√ {∑X^2 – (∑X)^2 /n} {∑Y^2 – (∑Y)^2 /n}

1745 – 50*155 / 5
r=
√ {558 – (50)^2 /5} {5475 – (155)^2 /5}

r = 0.81

Interpretation:

r = 0.81 indicates a high degree of positive relationship between interest rate &
savings.
  The explanatory power of the independent variable can be
assessed by the co-efficient of determination
(r^2), r^2 = 0.656

Interpretation:

r^2 = 0.656 indicates that 65.6% of the variation in the interest rate can be
explained by the variation in the savings.

25

20

15

Tax Rate
Production
10

0
1 2 3 4 5

Problem – 3:

Mahmud Textile is a renowned textile company in our Country. They produce

different types of cloths according to the demand of the buyers. They use
Regression analysis to find out the relationship between the Tax Rate & Their
Production.

Data of Tax Rate & Production are given below:

X Y
Tax rate (%) Production(Thousand
Number)
5 12
9 22
10 20
15 18
17 20

Requirements:

 Find the equation of Regression of production on tax rate.

 Estimate the relationship between tax rate & production in relative term
 Assess the explanatory power of the independent variable

Interpretation of the results should be shown.

Solution:

 The required equation is:

Y = a + b X; where
Y – Production (Dependent/ Criterion Variable)
X - Tax Rate(Independent/ Explanatory/ Predictor Variable)
a – Constant/ Intercept
b – Regression Co-efficient

For finding out the values of a & b, we solve the following formulas:
 ∑XY - ∑X*∑Y / n
b=
∑X^2 – ( ∑X )^2 / n

∑Y - b∑X
a=
n

or a=Y–bX

X Y XY X^2 Y^2
5 12 60 25 144
9 22 198 81 484
10 20 200 100 400
15 18 270 225 324
17 20 340 289 400
56 92 1068 720 1752

So, ∑XY - ∑X*∑Y / n

b=
∑X^2 – ( ∑X )^2 / n

1068 - 56*92/5
=
720 – (56)^2/5

= 1.4052

∑Y - b∑X
a=
n
 or a=Y–bX

∑Y ∑X
a= - b*
n n

92 56
= - 1.4052*
5 5

= 2.6618

We get,
b= 1.4052
Putting the value of b in the formula we get,
a = 2.6618

Hence the desired equation is : Y =1.4052 + 2.6618 X

Interpretation:

If the tax rate increases for 1% , the production increases for 1.4052 thousand
taka.

 The relationship between the variables in relative term can be

estimated with the help of the co-efficient of correlation, r.
 ∑XY - ∑X*∑Y / n
r=
√ {∑X^2 – (∑X)^2 /n} {∑Y^2 – (∑Y)^2 /n}

1068 – 56*92 / 5
r=
√ {720 – (56)^2 /5} {1752 – (92)^2 /5}

r = 0.92

Interpretation:

r = 0.92 indicates a very high degree of positive relationship between tax rate &
Production.

 The explanatory power of the independent variable can be

assessed by the co-efficient of determination
(r^2), r^2 = 0.846

Interpretation:

r^2 = 0.846 indicates that 84.6% of the variation in the production can be
explained by the variation in the tax rate.
25

20

15

Tax Rate
Production
10

0
1 2 3 4 5