Question: Question 6

Classified ads in the Australian offered several used Toyota Corollas for sale. Listed below are the ages of the cars and the advertised prices.

a) Make a scatter plot for these data.

b) Describe the association between age and price of a used Corolla. Do you think a linear model is appropriate?

c) Computer software says that R2 = 0.894. What is the correlation between age and price? Explain the meaning of R2 in this context.

d) Why doesn’t this model explain 100% of the variability in the price of a used Corolla?

e) Explain the meaning of the slope of the line, and the y-intercept of the line.

f) If you want to sell a 7-year-old Corolla, what price seems appropriate?

g) You have a chance to buy one of two cars. They are about the same age and appear to be in equally good condition. Would you rather buy the one with a positive residual or a negative residual? Explain.

h) You see a “For Sale” sign on a 10-year-old stating the asking price as $1500. What is the residual?

i) Would this regression model be useful in establishing a fair price for a 20-year-old car? Explain