Question

A linear regression model describing the relationship between the carat weight and price of very high quality diamonds is summarized below.

A diamond seller lists a very high quality diamond weighing 0.75 carats at a price of $8,999. Does this model over- or under-predict the price of this diamond? Select the option below that best summarizes the answer.

		The model over-predicts the price of this diamond because the residual is negative.
		The model under-predicts the price of this diamond because the residual is negative.
		The model under-predicts the price of this diamond because the residual is positive.
		We do not have enough information to answer this question.
		The model over-predicts the price of this diamond because the residual is positive.

Answer 1

Answer:

The model under-predicts the price of this diamond because the residual is negative

Given

r=0.9693

y 20312* – 5939

y 20312* – 5939

$\hat{y}$ = $9295

Residual = () =8999-9295= -296

y-

Since residual is negative.This implies mode is unde predicted.