Does the data seem the strength of the relationship among variables is sufficient to warrant using linear regression forecasting?
Carpet City needs to develop a means to forecast its carpet sales. The store manager considers that the stores are directly related to the number of new housing starts in town. The manager has met data from county records on monthly house construction permits as well as from store records on monthly sales. These data are as follows-
|
Monthly Carpet Sales(1,000 yd.)
|
Monthly Construction Permits
|
|
5
|
21
|
|
10
|
35
|
|
4
|
10
|
|
3
|
12
|
|
8
|
16
|
|
2
|
9
|
|
12
|
41
|
|
11
|
15
|
|
9
|
18
|
|
14
|
26
|
1) Develop a linear regression model for these data as well as forecast carpet sales if 30 construction permits for new homes are filed.
2) Determine the strength of the fundamental relationship between monthly sales and new home construction by using correlation.