A scatter diagram has points that show the relationship between two sets of data.
We have the following data,
where <em>x</em> is the average number of employees in a group health insurance plan and <em>y</em> is the average administrative cost as a percentage of claims.
To make a scatter diagram you must, draw a graph with the independent variable on the horizontal axis (<em>in this case x</em>) and the dependent variable on the vertical axis (<em>in this case y</em>). For each pair of data, put a dot or a symbol where the x-axis value intersects the y-axis value.
Linear regression is a way to describe a relationship between two variables through an equation of a straight line, called line of best fit, that most closely models this relationship.
To find the line of best fit for the points, follow these steps:
Step 1: Find and
as it was done in the below table.
Step 2: Find the sum of every column:
Step 3: Use the following equations to find intercept a and slope b:
Step 4: Assemble the equation of a line
