A company has recorded data on the weekly sales for its prod

A company has recorded data on the weekly sales for its product (y) and the unit price of the competitor\'s product (x). The data resulting from a random sample of 7 weeks follows. Using the residual plot determine if any model assumptions have been violated.

Solution

There are four principal assumptions

(i) linearity and additivity of the relationship between dependent and independent variables

(ii) statistical independence of the errors

(iii) homoscedasticity  of the errors

(iv) normality of the error distribution

THE ONLY PROBLEM WITH THIS IS THE LINEARITY OF THE PLOT