The Tasty Sub Shop Case:

A business entrepreneur uses simple linear regression analysis to predict the yearly revenue for a potential restaurant site on the basis of the number of residents living near the site. The entrepreneur then uses the prediction to assess the profitability of the potential restaurant site.

And

The QHIC Case:

The marketing department at Quality Home Improvement Center (QHIC) uses simple linear regression analysis to predict home upkeep expenditure on the basis of home value. Predictions of home upkeep expenditures are used to help determine which homes should be sent advertising brochures promoting QHIC’s products and services.

Discuss the difference in the type of prediction in both cases and provide rational of the reasons that these predictions were used.

Simple Linear Regression Analysis is done to predict the trend of one variable in accordance with another independent variable. This concept does not account for multiple independent or interdependent factors in predictions.

Thus, the projections are accurate when there is only one factor involved to influence the Prediction.

This is so in the QHIC case as any household that spends more on home upkeep will be an ideal advertising target for the firm.

However, just the number of residents in the locality cannot ensure the profitability of a restaurant. competition from other restaurants, net income and eating habits of the locality must also be considered.