Question

Interpret the following regression model:

            Repairs = 0.33 + 0.312 New Cars + 0.71 Used Cars

                            (1.9)     (1.09)                    (3.1)

                  R² = 38.4     Adj. R² = 34.3   Durbin-Watson = 2.0   F(p-value) = 0.03

Answer 1

The above regression equation is a multi variate regression equation depicting how new and used cars has an impact on the repairs of cars. Thus, independent variable in the above equation are new cars and used cars and the dependent variable in the above equation is repairs done.

There exists a positive relationship between used cars and number of repairs. As the number of new cars increases by 1 unit, the number of repairs increases by 0.312 unit. There also exists a positive relationship between number of used cars and number of repairs. Thus, as the number of used cars increases by 1 unit, number of repairs in the car industry increases by 0.71 units.

Also, the value of r squared of 38.4 shows that around 38 per cent variation in the number of repairs can be explained by variations in the number of new cars and variations in the used cars.