Posted by: meikah | 15 May 2007 | 6:41 pm
I’m posting here the quiz now. Take the quiz and tell me how you fared.
Polly Yurathane considers herself the SPC queen, after successfully explaining the beta coefficient of regression analysis (standardized regression coefficient), to her new boss, Hy O. Pinyon. Now she is preparing a presentation for division manager Emily Dickinson, a poetic manager who leads with an iron will nonetheless. Emily has requested information about the relationship of the cost of coal mined by Blackern Dirt Mine Company to the amount of coal mined and the cost to mine that coal.
Polly, knowing that Emily is a poet, assumes that she knows little about statistics, so she feels quite relaxed about her presentation, seeing it as an opportunity to once again mount her throne as SPC queen.
Opening the Power Point presentation she has prepared, she explains the concept of simple regression, using this data:
TOTAL COST ($1,000s)
She then shares a printout, generated by software that does simple regression, and explains patiently to Emily that this is a regression model that shows the relationship between the cost (Y) and the amount of coal mined (X).
(Click on the printout for a larger version.)
“You can use the model to predict your cost if you know the amount of coal mined,” she says slowly to the division manager, who has remained quiet through the first part of Polly’s presentation, reinforcing Polly’s inaccurate conclusion that Emily is not absorbing the message. Now, however, Emily asks a question:
“What assumptions are you making to assure that this model works?”
Not expecting such a sophisticated question, Polly stumbles for a minute, then asserts firmly, “It is very important that the dependent variable is a parameter and the independent variable is a random variable.”
Is Polly’s response to Emily’s question appropriate and accurate?
You can also click here for a more complete video explanation.