BMT Single linear regression (HL Only)

Terms from Business Management 5th edition by Paul Hoang

Correlation

The extent to which there is a relationship between two variables or events.

Extrapolation

A statistical technique that enables managers to estimate data values beyond the original data set used as the basis to determine the type of correlation.

Line of best fit (regression line)

A statistical technique that involves calculating and drawing a straight line that goes roughly through the middle of all the points on a scatter graph. It is used to determine the relationship, if any, between two variables under investigation.

Scatter diagrams

A statistical visual tool that can be used to show relationship between two different variables in a data set.

Simple linear regression

A statistical Business Management tool used to study the nature of the relationships between two variables.

Causation

Indicates that the occurrence of one event has caused the occurrence of a second event.

Benefits of simple linear regression

Quantifies justifications for decision making.

Minimises risks.

Limitations of simple linear regression

Benefits are subject to the validity of data collected.

Random variations and outliers in data sets can distort results.

Seasonal fluctuations can make it challenging to determine relationships and correlation.