Past exam of the mathematics course of the University of Cambridge 2003 ib Paper 1 3H Solution Created 2026-09-24 Updated 2026-10-14
Put , so . The ordinary least squares criterion is . Setting both partial derivatives to zero gives and . Therefore, provided , the centred simple linear regression estimators areThe Hessian of is , which is positive definite, so this stationary point is the unique minimum. From the mean-zero errors, both estimators are unbiased; independence and common error variance give , , and zero covariance. Normality is not needed for this derivation. If all coincide, the slope is not identifiable and only the intercept is determined.
Using the PDF data gives , , and . In particular, the fourth cost is 37 in the PDF; the TeX's 75 is a transcription error and would contradict the supplied covariance sum. The fitted simple linear regression isHere the centred intercept estimate is 42.4; an intercept at would instead be . For eight units the predicted unit cost is