Using the regression equation calculated in Question 5, create plots of the residuals versus each explanatory variable in the model. Also create a plot of the residuals versus the predicted retail price (often called a residual versus fit plot).
a. Does the size of the residuals tend to change as mileage changes?
b. Does the size of the residuals tend to change as the predicted retail price changes? You should see patterns indicating heteroskedasticity (nonconstant variance).
c. Another pattern that may not be immediately obvious from these residual plots is the right skewness seen in the residual versus mileage plot. Often economic data, such as price, are right skewed. To see the pattern, look at just one vertical slice of this plot. With a pencil, draw a vertical line corresponding to mileage equal to 8000. Are the points in the residual plots balanced around the line Y = 0?
d. Describe any patterns seen in the other residual plots.