A simple regression relating annual average gasoline price (cents per gallon) to

Question

A simple regression relating annual average gasoline price (cents per gallon) to the annual average price of crude oil (dollars per barrel) was estimated. See Summary Output below 1. Write the equation in numerical form and interpret the regression coefficients 2. Evaluate the equation statistically 3. Predict the price of gasoline when oil is $60 per barrel. 4. Predict the change in the price of gasoline when the price of oil decreases by $8 per barrel. Regression Statistics Multiple R R Square 0.991942876 0.983950669 Standard Error Observations 8.683713944 20 Standard Error Coefficients Intercept Price oil t StatP-value 60 3.591859618 17.43328 0.0002 3.0 0.08532466 33.2196 1.32E-17

Explanation / Answer

1)
y^ = 60 + 3 *x
when we increase the price of crude oil by 1 unit
there is increase of 3 unit in gasoline price
2)
p-value of x = 1.32 * 10^(-17) << 0 .05
hence the equation is significant
3)
when x = 60
y^ = 60 + 60 * 3 = 240
4)
when x is decreased by 8
y is decreased by 3 *8 = 24

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