Health Insurance: Administrative Cost The following data are based on information from Domestic Affairs. Let x be the average number of employees in a group health insurance plan, and let y be the average administrative cost as a percentage of claims.

x 3 7 15 35 75 y 40 35 30 25 18

(a) Make a scatter diagram and draw the line you think best fits the data.

(b) Would you say the correlation is low, moderate, or strong? positive or negative?

(c) Use a calculator to verify that Sx 5135, Sx2 5 7133, Sy 5148, Sy2 5 4674, and Sxy 5 3040. Compute r. As x increases from 3 to 75, does the value of r imply that y should tend to increase or decrease? Explain.

AppendixLO1