Question

Examine your classmate’s problem to discuss the meaning of the standard error of the estimate and how it affects the predicted values of Y for that analysis.

For this weeks discussion I would like to look at the dollar amount made by a company after increasing/decreasing advertising. For the best result the company should be stable with room to grow or decline in sales. By tracking the increase or decrease of sales revenue with the increase or decrease of advertisement. I believe the graph would show linear regression with these variables that could result in better business practices for the company involved with a better understanding of the impact advertisement will have on their business.

Answer 1

Standard error of estimate:

The standard error of estimate is the measure of the variation of an observation made around the computed regression line. Simply it is used to check the accuracy of predictions made with the regression line. It measures the standard distance between the line and the data points.

The formula of the standard error of estimate is:

Where Y - response variable

If the predicted value is accurate or more close to the actual value then the standard error of estimate will decrease and it is good for prediction. That is predicted value affects the standard error of estimate.

Yes, the better business practices for the company involved with a better understanding of the impact advertisement will have on their business, because as the advertisement increases obviously the revenue of the company will increase.