Problem 2 A hotel chain is trying to model a hotel\'s operating margin, 100%\" (

Question

Problem 2 A hotel chain is trying to model a hotel's operating margin, 100%" (revenue-cost)/revenue. For 100 hotels, they recorded the operating margin (y) as a percentage and the amount of office space within 3 miles of the site (in 1,000s of ft). Let x- office space, y margin. The following calculations were performed xbar 492.23 ybar 45.739 S= 165.652481 7.75213 S 643.917202 Give the sample correlation coefficient, r. Give and interpret the slope, b Give and interpret the y-intercept, bo. Comment on whether or not it has practical meaning

Explanation / Answer

1)here as correlation coefficient r =Sxy/(Sx*Sy) =643.917202/(165.652481*7.75213)=0.501431

2) slope b1 =r*Sy/Sx =0.501431*7.75213/165.652481=0.023466

it represent that for 1000 square feet increase in office space average margin increase by 0.023466

3) intercept bo =Ybar-b1*Xbar=45.739-0.023466*492.23=34.18833

intercept is meaning less as there will be no profit margin for 0 square feet of office space,

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