Which career is likely to earn the highest salary?
1 answer:
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x: 500, 700, 750, 590 , 540, 650, 480
y: 7.00, 7.50 , 9.00, 6.5, 7.50 , 7.0, 4.50
We want to create a linear model like this :
Where
And:
With these we can find the sums:
And the slope would be:
Now we can find the means for x and y like this:
And we can find the intercept using this:
And the line would be:
Part b
The correlation coefficient is given by:
For our case we have this:
The determination coefficient is given by:
Part c
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Answer:
The own price elasticity is 0.28.
The demand for good a is inelastic.
Explanation:
The price elasticity of demand for a product is the change in the quantity demanded of a product due to a change in its price.
When the price of good A increases by 7% the quantity demanded of that product decreases by 2%.
The own price elasticity of demand
=
=
= 0.28
The elasticity of demand is less than 1, this implies that demand is inelastic.
A greater change in price is leading to a smaller change in quantity demanded.