Question: Suppose that there is a linear relationship between the number of students x

in an elementary school and the annual budget y. Write a population regression model to describe this relationship.

1. Which parameter in your model is the fixed cost in the budget (for example, the salary of the principal and some administrative costs) that does not change as x increases?
2. Which parameter in your model shows how total cost changes when there are more students in the school? Do you expect this number to be greater than 0 or less than 0?
3. Actual data from schools will not fit a straight line exactly. What term in

your model allows variation among schools of the same size x?

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