A Simple Linear Regression,Sales = β₀ + β₁ Advertising

question 24

Essay

A simple linear regression,Sales = β₀ + β₁ Advertising + ε,is estimated using cross-sectional data from 10 firms.The resulting residuals e,along with the values of the explanatory variable Advertising (x,in $100s),are shown in the accompanying table. a.Graph the residuals e against Advertising (x)and look for any discernible pattern.
b.Which assumption is being violated? Discuss its consequences and suggest a possible remedy.

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Definitions:

Chalazion

A chronic glandular cyst of the eyelid, resulting from the obstruction and inflammation of a meibomian gland, often presenting as a painless swelling.

Blepharitis

Inflammation of the eyelid margins, often causing redness, itching, and dandruff-like scales on eyelashes.

Corneal Abrasion

A scratch or scrape on the surface of the eye's cornea, often causing significant discomfort and sensitivity to light.

Light Rays

Lines that represent the direction along which the light energy is moving.