An analysis of spending by a sample of credit card bank cardholders shows that spending by cardholders in January (Jan) is related to their spending in December ( Dec):

The assumptions and conditions of the linear regression seemed to be satisfied and an analyst was about to predict January spending using the model shown below:
Jan = $612.07 + 0.403 Dec
Another analyst worried that different types of cardholders might behave differently. She examined the spending pat-terns of the cardholders and placed them into five market Segments. When she plotted the data using different colors and symbols for the five different segments, she found the following:

Look at this plot carefully and discuss why she might be worried about the predictions from the model
Jan = $612.07 + 0.403 Dec.

Transcribed Image Text:

8000 6000 4000 2000: 0 1000 2000 3000 4000 5000 000 December 8000 7000 6000t 5000 4000 3000 2000 1000 0 1000 2000 3000 4000 500 00 7000 December