The Mercer Human Resource Consulting website (www.mercer.com) lists prices of certain items in selected cities around the world. It also reports an overall cost of living index for each city compared with the costs of hundreds of items in New York City. For example, London at 110.6 is 10.6% more expensive than New York. You’ll find the 2006 data for 16 cities in the data set ch07_MCSP_Cost_of_Living. Included are the 2006 cost of living index, the cost of a luxury apartment (per month), the price of a bus or subway ride, the price of a CD, the price of an international newspaper, the price of a cup of coffee (including service), and the price of a fast-food hamburger meal. All prices are in U.S. dollars.

Examine the relationship between the overall cost of living and the cost of each of these individual items. Verify the necessary conditions and describe the relationship in as much detail as possible. (Remember to look at direction, form, and strength.) Identify any unusual observations.

Based on the correlations and linear regressions, which item would be the best predictor of overall cost in these cities? Which would be the worst? Are there any surprising relationships? Write a short report detailing your conclusions.