In the data frame nswdemo (DAAG), plot 1978 income (re78) against 1975 income (re75). What features of the plot make the fitting of a regression relationship a challenge? (a) Restricting attention to...

In the data frame nswdemo (DAAG), plot 1978 income (re78) against 1975 income (re75). What features of the plot make the fitting of a regression relationship a challenge?

(a) Restricting attention to observations for which both re78 and re75 are non-zero, plot log(re78) against log(re75), and fit a trend curve. Additionally, fit a regression line to the plot. Does the regression line accurately describe the relationship. In what respects is it deficient?

(b) Now examine the diagnostic plot that is obtained by using plot() with the regression object as parameter. What further light does this shed on the regression line model?