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Correlation/Regression Analysis Used in Decisions

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1. Please describe a situation in which a correlation analysis or regression analysis could contribute to a better decision. The situation can be from a work, of general interest, or experienced in private life.

2. Please describe a situation in which correlation analysis or regression analysis can be (or was) misused to explain cause and effect relationship or a case of fortuitous correlation.

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Solution Summary

324 words give a situation where these analyses can help make a better decision, and one where they can be misused for the opposite.

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1. Suppose that I want to predict how much money I would spend on my monthly groceries in the month of July this year, based on the expenditure data that I have collected over the past 12 months. In this case, I can run a regression analysis with month number as the independent variable and the expenditure on groceries (in dollars) as the dependent variable. This prediction can help me budget my monthly income for July if I think I am going to ...

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