TABLE 14-5
A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies.She proceeds to randomly select 26 large corporations and record information in millions of dollars.The Microsoft Excel output below shows results of this multiple regression.
-Referring to Table 14-5,when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable,she obtained an r² value of 0.601.What additional percentage of the total variation of sales has been explained by including capital spending in the multiple regression?

Question

TABLE 14-5
A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies.She proceeds to randomly select 26 large corporations and record information in millions of dollars.The Microsoft Excel output below shows results of this multiple regression.

-Referring to Table 14-5,when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable,she obtained an r² value of 0.601.What additional percentage of the total variation of sales has been explained by including capital spending in the multiple regression?

Quizplus · Accepted Answer

The r² value of 0.601 indicates that 60.1% of the variation in sales is explained by wages alone. If including capital spending in the multiple regression explains more variation, the additional percentage explained is calculated by the difference between the new r² value and 0.601. The problem implies that this additional percentage is 8.8%.

TABLE 14-5 A Microeconomist Wants to Determine How Corporate Sales Are Influenced