Question

Property assessments. The data that follow show assessed value for property tax purposes (Y1 in thousand dollars) and sales price (Y2, in thousand dollars) for a sample of 15 parcels of land for industrial development sold recently in "arm's length" transactions in a tax district. Assume that bivariate normal model (2.74) is appropriate here. Plot the data in a scatter diagram. Does the bivariate normal model appear to be appropriate here? Discuss.

Yi1 Yi2

13.9 28.6

16.0 34.7

10.3 21.0

11.8 25.5

16.7 36.8

12.5 24.0

10.0 19.1

11.4 22.5

13.9 28.3

12.2 25.0

15.4 31.1

14.8 29.6

14.9 35.1

12.9 30.0

15.8 36.2

Answer 1

The two variables are highly correlated and if we assume that they follow normal distribution individually, then it must be a bivariate normal distribution also.