Question 2.119

2.119 Companies of the world with logs

inccom

In Exercises 2.10 (page 72), 2.27 (page 78), and 2.58 (pages 95–96), you examined the relationship between the numbers of companies that are incorporated and are listed on their country's stock exchange at the end of the year using data collected by the World Bank.24 In this exercise, you will explore the relationship between the numbers for 2012 and 2002 using logs.

  1. Which variable do you choose to be the explanatory variable, and which do you choose to be the response variable? Explain your answer.
  2. Plot the data with the least-squares regression line. Summarize the major features of your plot.
  3. Give the equation of the least-squares regression line.
  4. Find the predicted value and the residual for Sweden.
  5. Find the correlation between the two variables.
  6. Compare the results found in this exercise with those you found in Exercises 2.10, 2.27, and 2.58. Do you prefer the analysis with the original data or the analysis using logs? Give reasons for your answer.

2.119

(a) The log 2002 data (explanatory) should explain the log 2012 data (response). (b) There is a strong positive linear relationship. (c) . (d) , . (e) . (f) Answers will vary.