Question: Health Insurance: Administrative Cost

The following data are based on information from Domestic Affairs. Let x be the average number of employees in a group health insurance plan, and let y be the average administrative cost as a percentage of claims.

a.) Make a scatter diagram and draw the line you think best fits the data.

b.) Would you say the correlation is low, moderate, or strong? Positive or negative?

c.) Use a calculator to verify that ∑x = 135, ∑x² = 7133, ∑y = 148, ∑y² = 4674, and ∑xy = 3040. Compute r. As x increases, does the value of r imply that y should tend to increase or decrease? Explain.