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A Simple Linear Regression,Sales = β0 + β1 Advertising

Question 24

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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 simple linear regression,Sales = β<sub>0</sub> + β<sub>1</sub> 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. 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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