2.144 Dwelling permits and sales for 23 countries. The Organisation for Economic Co-operation and Development collects data on main economic indicators (MEIs) for many countries. Each variable is recorded as an index with the year 2000 serving as a base year. This means that the variable for each year is reported as a ratio of the value for the year divided by the value for 2000. Use of indices in this way makes it easier to compare values for different countries. Table 2.3 gives the values of three MEIs for 23 countries.31

  1. (a) Make a scatterplot with sales as the response variable and permits issued for new dwellings as the explanatory variable. Describe the relationship. Are there any outliers or influential observations?

  2. (b) Find the least-squares regression line and add it to your plot.

  3. (c) Interpret the slope of the line in the context of this exercise.

  4. (d) Interpret the intercept of the line in the context of this exercise. Explain whether or not this interpretation is useful in explaining the relationship between these two variables.

  5. (e) What is the predicted value of sales for a country that has an index of 224 for dwelling permits?

    Table : TABLE 2.3 Dwelling Permits, Sales, and Production for 21 Countries
    Country Dwelling permits Sales Production
    Australia 116 137 109
    Belgium 125 105 112
    Canada 224 122 101
    Czech Republic 178 134 162
    Denmark 121 126 109
    Finland 105 136 125
    France 145 121 104
    Germany 54 100 119
    Greece 117 136 102
    Hungary 109 140 155
    Ireland 92 123 144
    Japan 86 99 109
    Korea 158 110 156
    Luxembourg 145 161 118
    Netherlands 160 107 109
    New Zealand 127 139 112
    Norway 125 136 94
    Poland 163 139 159
    Portugal 53 112 105
    Spain 122 123 108
    Sweden 180 142 116

  6. (f) Canada has an index of 224 for dwelling permits. Find the residual for this country.

  7. (g) What percent of the variation in sales is explained by dwelling permits?