1.3 You come across a magazine article reporting the following relationship between annual expenditure on prepared dinners (PD) and annual income (INC):

PD = 23.4 + 0.003INC The coefficient of the INC variable is reported as significant.

a Does this relationship seem plausible? Is it possible to have a coefficient that is small in magnitude and yet significant?

b From the information given, can you tell how good the estimated model is?

c What are the expected expenditures on prepared dinners of a family earning €30,000?

d If a family earning €40,000 spent €130 annually on prepared dinners, what is the residual?

e What is the meaning of the negative residual?