Question

Suppose you wanted to understand the relationship between a customer's yearly income (X) and the number of movies (Y) the customer watched in a year. You then gather data on incomes and the number of movies watched in a year. The range of incomes in your data set is $5K to $150K. After fitting a simple linear model and performing all the appropriate diagnostics, the model showed that, on average, for every $10K in income, the customer watched 1.5 movies in the year. So, for example, if a customer earned 60K in a year, he or she would be expected to watch nine movies during the year. Now you want to apply this model to your very wealthy friend who will earn $1 million in the next year. Is this an appropriate application of your model? Why or why not? Provide specific examples to justify your opinion.

Answer 1