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Business Analytics

The document discusses two linear regression models for predicting vehicle price based on fuel efficiency and engine size. Model 2, which includes both variables, has a higher R-squared value indicating it explains more of the variability in price, however the coefficient for engine size is not statistically significant. In conclusion, both models are statistically significant but practical significance of the variables needs consideration, and Model 1 may be preferred if engine size is not important.

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22 views3 pages

Business Analytics

The document discusses two linear regression models for predicting vehicle price based on fuel efficiency and engine size. Model 2, which includes both variables, has a higher R-squared value indicating it explains more of the variability in price, however the coefficient for engine size is not statistically significant. In conclusion, both models are statistically significant but practical significance of the variables needs consideration, and Model 1 may be preferred if engine size is not important.

Uploaded by

moizzshah86
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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business analytics

SYED MOIZZ ALI KAZMI


2022432108
Model 1 - Simple Regression:

Coefficients:

 Intercept (const): The estimated intercept is 5.9786. It represents the estimated value of the
dependent variable (Price_in_Thousands) when the independent variable (Fuel_Efficiency) is
zero.

 Fuel Efficiency: The coefficient for Fuel Efficiency is 0.9705. It indicates that for each unit
increase in Fuel Efficiency, the Price_in_Thousands is expected to increase by 0.9705 units.

Model Fit:

 R-squared: The R-squared value is 0.995, suggesting that 99.5% of the variability in the
dependent variable is explained by the model.

Statistical Significance:

 F-statistic: The F-statistic is 629.0 with a p-value of 0.000139. This indicates that the overall
model is statistically significant.

 P-value (Fuel_Efficiency): The p-value for Fuel_Efficiency is 0.000, indicating that it is statistically
significant.

Practical Significance:

 The coefficient for Fuel_Efficiency (0.9705) suggests a strong positive relationship. However,
practical significance depends on the context of the problem and the units of the variables.

Model 2 - Multiple Regression:

Coefficients:

 Intercept (const): The estimated intercept is 5.1133.

 Fuel_Efficiency: The coefficient for Fuel_Efficiency is 0.8095.

 Engine_Size: The coefficient for Engine_Size is 2.2243.

Model Fit:

 R-squared: The R-squared value is 0.999, indicating that 99.9% of the variability in the
dependent variable is explained by the model.

Statistical Significance:

 F-statistic: The F-statistic is 765.5 with a p-value of 0.00130, indicating that the overall model is
statistically significant.

 P-values: Fuel_Efficiency (0.008) and Engine_Size (0.148) are statistically significant at


conventional significance levels.

Practical Significance:
 Similar to Model 1, practical significance depends on the context. Both Fuel_Efficiency and
Engine_Size seem to have an impact on Price_in_Thousands.

Model Comparison:

 R-squared: Model 2 has a higher R-squared value, indicating that it explains more variability in
the dependent variable.

 F-statistic: Both models have significant F-statistics, but Model 2's F-statistic is slightly higher.

 Coefficients: In Model 2, the coefficient for Engine_Size is not statistically significant at a


conventional level (p-value = 0.148). Model 1, with only Fuel_Efficiency, might be preferred if
Engine_Size is not deemed important.

In summary, both models are statistically significant, but Model 2 explains more variability. However, the
practical significance of the coefficients should be considered, and a decision might depend on the
specific goals of your analysis. If Engine_Size is not critical, Model 1 could be preferred for simplicity.

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