Business Analytics (2nd Edition)
2nd Edition
ISBN: 9780321997821
Author: James R. Evans
Publisher: PEARSON
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Chapter 2, Problem 5PE
A manager needs to identify some information from the Purchase Orders Excel file but has only the order number. Modify the Excel file to use the VLOOKUP
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3. Bayesian Inference – Updating Beliefs
A medical test for a rare disease has the following characteristics:
Sensitivity (true positive rate): 99%
Specificity (true negative rate): 98%
The disease occurs in 0.5% of the population.
A patient receives a positive test result.
Questions:
a) Define the relevant events and use Bayes’ Theorem to compute the probability that the patient actually has the disease.b) Explain why the result might seem counterintuitive, despite the high sensitivity and specificity.c) Discuss how prior probabilities influence posterior beliefs in Bayesian inference.d) Suppose a second, independent test with the same accuracy is conducted and is also positive. Update the probability that the patient has the disease.
4. Linear Regression - Model Assumptions and Interpretation
A real estate analyst is studying how house prices (Y) are related to house size in square feet (X). A simple
linear regression model is proposed:
The analyst fits the model and obtains:
•
Ŷ50,000+150X
YBoB₁X + €
•
R² = 0.76
• Residuals show a fan-shaped pattern when plotted against fitted values.
Questions:
a) Interpret the slope coefficient in context.
b) Explain what the R² value tells us about the model's performance.
c) Based on the residual pattern, what regression assumption is likely violated? What might be the
consequence?
d) Suggest at least two remedies to improve the model, based on the residual analysis.
Chapter 2 Solutions
Business Analytics (2nd Edition)
Ch. 2 - The Excel file Presidents Inn Guest Database...Ch. 2 - The worksheet Base Data in the Excel file Credit...Ch. 2 - A manager needs to identify some information from...Ch. 2 - Example 1.4 in Chapter 1 described a scenario for...Ch. 2 - Example 1.8 in Chapter 1 provided data from an...Ch. 2 - The following exercises use the Purchase Orders...Ch. 2 - Use INDEX and MATCH functions to fill in a table...Ch. 2 - Suppose that a company offers quantity discounts....
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