Linear model

Given the estimated linear model for the relationship between a car’s age and its price is:

P = 12319.6 – 924A, where P is predicted price and A is age of car.

Answer the following questions:

i.                     Explain the meaning of the slope of the line, and the y-intercept of the line. [2 Marks]

ii.                   If you want to sell a 7-year-old Corolla, what price seems appropriate? [1 Marks]

iii.                  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. [2 Marks]

iv.                 You see a “For Sale” sign on a 10-year-old stating the asking price as $1500. What is the residual? [2 Marks]

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