A sociologist is looking at the relationship between consumption expenditures of families in the United States (Consumption in $), family income (Income in $), and whether or not the family lives in an urban or rural community (Urban = 1 if urban, 0 otherwise). She collects data on 50 families across the United States, a portion of which is shown in the accompanying table.

a. Estimate: Consumption = ?₀ + ?₁ Income + ?. Compute the predicted consumption expenditures of a family with income of $75,000.

b. Include a dummy variable Urban to predict consumption for a family with income of $75,000 in urban and rural communities.

c. Include a dummy variable Urban and an interaction variable (Income ? Urban) to predict consumption for a family with income of $75,000 in urban and rural communities.

d. Which of the preceding models is most suitable for the data? Explain.

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Consumption Income Urban 62336 87534 60076 94796 1 59055 100908