Linear least squares in $\mathbb{R}^{3}$ with three data points. Given data points in the form $(x,y,f(x,y)) = (1,1,7),(1,3,0),(1,-1,8)$, find the least squares solution $\hat x$ to the system of equations $Ax=b$.
Is there enough information to use least squares? The solution created $A$ using the $x$ and $y$ coordinates and $b$ using $f(x,y)$. I do not understand  this problem. How can you solve for $\hat x$ when you do not know anything about the function? Isn't it presumptuous to assume a linear relationship?

We are given a sequence of measurements $\left\{ x_{k}, y_{k}, f_{k} \right\}_{k=1}^{3}$. Generally, we could hope to find three fit parameters, a trial function like
$$
  f(x,y) = c_{0}g_{0}(x,y) + c_{1}g_{1}(x,y) + c_{2}g_{2}(x,y)
$$
where the functions $g$ are linearly independent. 
You asked about the linear case where
$$
 f(x,y) = c_{0} + c_{1}x + c_{2}y.
$$
That problem looks like this
$$
\begin{align}
  \mathbf{A} c &= F \\[5pt]
%
  \left[
    \begin{array}{ccc}
       1 & x_{1} & y_{1} \\
       1 & x_{2} & y_{2} \\
       1 & x_{3} & y_{3} 
    \end{array}
  \right]
  \left[
    \begin{array}{c}
       c_{0} \\
       c_{1} \\
       c_{2} 
    \end{array}
  \right]
&=
  \left[
    \begin{array}{c}
       f_{1} \\
       f_{2} \\
       f_{3} 
    \end{array}
  \right] \\[5pt]
%
  \left[
    \begin{array}{ccr}
       1 & 1 &  1 \\
       1 & 1 &  3 \\
       1 & 1 & -1 
    \end{array}
  \right]
  \left[
    \begin{array}{c}
       c_{0} \\
       c_{1} \\
       c_{2} 
    \end{array}
  \right]
&=
  \left[
    \begin{array}{c}
       7 \\
       0 \\
       7 
    \end{array}
  \right] 
\end{align}
$$
The is no solution vector $c$ which satisfies this equation, so instead of asking that $\mathbf{A}c-F = 0$, we ask instead that $\mathbf{A}c-F$ be as small as possible.To measure length, we must select a norm, and the choice here is the $2-$norm of least squares.
The least squares solution is
$$
  c_{LS} = \mathbf{A}^{\dagger}F + \left(\mathbf{I}_{3} - \mathbf{A}^{\dagger}\mathbf{A} \right) y, \quad y\in\mathbb{C}^{3}
$$
There is a problem with this model in that the first two column vectors of $\mathbf{A}$ are identical. This matrix has rank $\rho = 2.$ We can't use the normal equations.
Using the SVD, 
$$
 \mathbf{A}^{\dagger} = \frac{1}{24}
\left[
\begin{array}{ccr}
 4 & 1 & 7 \\
 4 & 1 & 7 \\
 0 & 6 & -6 \\
\end{array}
\right]
$$
and the full solution is
$$
  c_{LS} = \frac{1}{24}
  \left[
    \begin{array}{r}
       77 \\
       77 \\
       -42 
    \end{array}
  \right]
+ \alpha
  \left[
    \begin{array}{r}
      -1 \\
       1 \\
       0 
    \end{array}
  \right].
$$
The least squares fit is the best fit, but it may not be a good fit. That is, given the trial function, the method will find the best parameters. But the trial function may be bad.
The residual error vector
$$
 r(c_{LS}) = \frac{1}{6}
  \left[
    \begin{array}{r}
      -14 \\
       7 \\
       7 
    \end{array}
  \right].
$$
The total error is $r\cdot r = \frac{49}{6} \approx 8.2.$ 
