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.

x 3 7 15 35 75

y 40 35 30 25 18

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

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

c.) Use a calculator to verify that Ex = 135, Ex² = 7133, Ey = 148, Ey² = 4674, and Exy = 3040. Compute r. As x Increases, does the value of r imply that y should tend to increase or decrease? Explain.